NEW YORK, N.Y. – Teresa Ghilarducci, Director of The New School’s Retirement Equity Lab, today issued her support for Mayor de Blasio’s “Retirement Security Plan” announced in yesterday’s annual State of the City address.
“This is an opportunity to prevent thousands of middle-class older workers in New York City from falling into poverty in their so-called golden years,” said Teresa Ghilarducci, Professor of Economics and Director of The New School’s Retirement Equity Lab (ReLab). “Currently, only 33% of the city’s private-sector workers have coverage on the job compared to 37% nationally, and even that number is dwindling. By requiring employers to enroll their workers in a city-facilitated IRA saving account, the Mayor is taking the first step in making a real dent in the city’s retirement coverage gap.”
The Mayor’s plan would require private-sector employers with five or more employees who don’t already offer retirement coverage to auto-enroll their workers in a city-facilitated Roth IRA retirement savings plan. Employee contributions would be set at 5%, with the option for employees to opt out or change their contribution level. The plan would be overseen by a board appointed by the city, managed by a third-party administer and limited to investment in low-cost index funds.
In 2018, Governor Andrew Cuomo and state lawmakers enacted a similar program, titled “Secure Choice.” While this plan takes the important step of covering private-sector workers across the state, it relies on voluntary employer participation. Ghilarducci notes that the city plan, if implemented, will guarantee an increase in coverage by requiring employers to participate.
- ReLab’s recent report, “Retirement Readiness of New York City’s Workers,” describes the lack of retirement coverage and the likely consequence of an increase number of city workers falling into poverty in retirement. The report finds:
Retirement coverage for New York City workers is lower than the national average and declining. Only 33 percent of New York City workers were participating in a workplace retirement plan in 2016, down from 39 percent in 2006. Coverage rates in New York City remain significantly below the national average of 37 percent.
- New York City workers have not been able to save enough under the current system. Nearly half – 48% – of near-retirement New York households have less than $10,000 in total liquid assets. The median liquid assets of near-retirement households residing in metropolitan areas of New York State is just $5,000 for single households and $60,000 for coupled households. More than 1 million households, or 42% of near-retirement New York households, do not have a DB or DC pension in a current or past job. Most households in this group have no liquid assets and will be entirely dependent on Social Security income in retirement.
- If we do nothing, middle-class workers nearing retirement will likely fall into poverty when they retire. Without increasing city workers’ access to retirement coverage on the job, the share of near-retiree households in poverty or near poverty while working will more than double if they retire at age 62, increasing from 8.2 percent while working to 21.6 percent in retirement.