Oregon just opened its state-sponsored retirement plans to another two groups of workers without access to a 401(k): the self-employed and freelancers.
OregonSaves, the state’s retirement savings program, announced on Tuesday those not in a traditional job will now have access to a “workplace” retirement plan. Previously, only employees at companies that did not offer 401(k) or similar accounts were able to participate in OregonSaves. The program provides employees portable individual retirement accounts they can take with them throughout their careers, and includes automatic contributions from their paychecks.
More than 45,000 employees have already saved more than $9 million for retirement since OregonSaves began its pilot program in July 2017. Oregon was the first state to offer this type of program, and is still enrolling employers and employees in waves (the state expects the program will be complete by the end of 2020, it said).
The program was designed to help workers without access to an employer-sponsored retirement plan, no matter the reason. Self-employed and gig economy workers typically don’t have access to these sorts of plans, though some employers have started -- car service company Uber teamed up with robo adviser Betterment to offer its drivers a retirement plan. But these types of workers usually have other challenges that hinder their ability to save for retirement too, such as inconsistent and fluctuating income or little assistance in setting up a program, said Joel Metlen, OregonSaves operations director. “They have to figure out how to do it on their own, and that can be daunting,” he said. “You don’t have an employer there helping you.”
The U.S. has a looming retirement crisis. Half of the private sector workforce (about 58 million full- and part-time employees, according to the Pension Rights Center) are not participating in a workplace retirement plan. A lack of retirement savings can be detrimental to a person upon reaching retirement age, forcing them either to reduce their cost of living or continue working into old age.
Future retirees also won’t have pensions to rely on. Many companies have switched over to defined-contribution plans, like the 401(k), which puts the onus of saving on employees. Only 16% of Fortune 500 companies offered a pension to new hires in 2017, down from 59% in 1998, London-based insurance company Willis Towers Watson found.
About 40% of U.S. workers are expected to be freelancing by 2020 (up from one in three workers today), according to financial software company Intuit INTU, (creator of TurboTax), but many don’t feel they’ll be prepared for retirement, a study by Betterment found. Almost 40% of the 1,000 respondents 25 and older said they felt unprepared to save enough to maintain their lifestyle in retirement, and 16% of those who are full-time gig economy workers or “side hustlers” said they plan to supplement their retirement income with more side gigs.
Other states, including Illinois and California, have since introduced their own state-sponsored retirement plans since Oregon, and almost all other states have considered offering a similar program.