As the percentage of workers covered by traditional employer pension plans has plummeted in recent years, saving has become the only path to secure retirement income beyond social security. Although a significant proportion of employers now offer their workers a tax advantaged retirement savings product like the 401(k), tens of millions of workers nationwide simply do not have access to an employer sponsored retirement savings plan. In addition, individual retirement accounts (IRAs) and other retirement products offered by private financial institutions have failed to fill the gap in employer coverage, in part due to the high fees and complexity associated with these accounts. The time has come for government to play a role in expanding access to low-cost, high quality, retirement savings account.
This issue brief describes the conceptual framework for Golden Dream Accounts, a proposal to provide a voluntary, portable retirement account for California private sector workers who do not have access to a work-based retirement savings plan.
In summary, Golden Dream Accounts calls for the state of California, either on its own or in cooperation with one or more private financial institutions, to offer some combination of:
- A low-cost Individual Retirement Account (IRA) that can be opened directly by workers;
- A payroll deduction IRA, likely offered through employers, that allows employee contributions to be automatically deducted and deposited into the Golden Dream IRA; and
- A SIMPLE IRA, offered through employers, with similar features to the account above, but offered as a SIMPLE IRA, enabling employers to contribute directly to the account.
For the full text of the issue brief, please see the PDF attached below.