57 Million Americans Don't Have Access To A Retirement Account. A Potential New Plan Could Fix That.

Congress is finally addressing one of the United States’ most pressing problems — how financially unprepared many Americans are for retirement and the lack of employer-sponsored retirement accounts.

To address the looming retirement crisis, a bipartisan legislative group is exploring the option of a federal program modeled after the Thrift Savings Plan — the retirement plan available to Congresspeople and other federal workers. The TSP is a federally run retirement plan that includes a few features, like automatic enrollment, that have dramatically increased enrollment and participation and, ultimately, led to more savings for retirement.

The new program, which would be made to be offered to workers who don’t have access to an employer-sponsored retirement plan, would be modeled after the TSP. The TSP includes a 1% automatic enrollment and has a match of up to 3% and on the next 2 percent matches 50 cents per dollar saved, per CNBC. The TSP as it currently exists is basically the same as a private-employer-sponsored 401k plan, just for federal employees.

And creating a national retirement plan could be a game-changer. Almost 40% of U.S. workers, or some 57 million Americans, don’t have retirement accounts sponsored by their employer at all, and less than half of low-income workers have access to a work-sponsored plan.

Meanwhile, 88% of the highest earners do have access to work-sponsored retirement accounts, showing a major wealth disparity in what types of workplaces offer programs that help their employees save for retirement.

But access itself isn’t the only problem. More than half of Americans say they are behind in saving for retirement, and many worry they won't be able to retire at all, or will face significant financial hardship if and when they do retire.

According to a 2021 survey, 41% of Americans feel they don’t have enough savings to retire comfortably, 59% have decided they’ll have to work longer than they’d hoped, and 36% fear they will never be able to retire at all. All generations are affected, and more than 50% of workers aged 40 to 73 have less than $50,000 in the bank for retirement, while almost one-third aren’t even saving 5% of their income each year for retirement.

While in the Spring, the House passed a similar bill called Securing a Strong Retirement Act of 2022, also known as SECURE Act 2.0, that would require most private employers to automatically enroll new hires in the program at a pretax contribution rate of 3% of their salary with a yearly increase of 1% up to at least 10% (not to exceed 15%) as well as make a number of major overhauls for retirement savings, the bill doesn’t fully address the gap in workers who just don’t have access to employer-sponsored retirement savings accounts at all.

By creating a TSP-like program, a national, federal retirement savings plan for the 57 million workers who work jobs that don’t offer them — Congress can make retirement savings accounts more accessible to many more people. Alongside the SECURE Act 2.0, if they were both to become law, many more employers would launch employer-sponsored retirement accounts, and there could be a massive change (for the better) in retirement savings in the United States.

There’s plenty to work out — how the bill will address companies that don’t offer retirement plans at all is yet to be determined, and how much of the plan will be structured is up in the air. But it’s a solid start on making sure retirees have a better plan than what has been on the table for the past few decades.