People who are are self-employed or who work for small businesses often lack easy access to retirement investment accounts. A new push led by several North Carolina lawmakers could fix that by creating a new system to let people make automatic paycheck deductions into a state-operated IRA system.
Rep. Jarrod Lowery, R-Robeson, is leading the effort. He filed the same bill two years ago but couldn’t convince enough lawmakers to get on board. But this year he says the time is ripe to finally make the change — especially with emerging concerns about the stability of Social Security, rising inflation, and the shift among more people working for themselves, or in the gig economy, or in other subcontracted jobs.
“We’re talking about barbers, we’re talking about laborers, factory workers, farm workers, electricians,” Lowery said Wednesday. “If they’re prepared for retirement, they can live those golden years in the decency that they deserve.”
Right now, he added, too many of them aren’t prepared for retirement. And that could create a burden on other taxpayers, as the state swoops in to help low-income elderly residents.
Lowery estimated that the state could save roughly $500 million a year in public assistance programs if these workers were better prepared for retirement.
Businesses largely stopped offering their employees pensions years ago, and now many aren’t offering a 401(k) or similar investment option, either. The text of the bill says more than 1.7 million families in North Carolina have no access to a retirement savings program through work.
Anyone can open an IRA or Roth IRA on their own, at a variety of banks and other financial institutions.
However, Lowery said, studies show people are much less likely to save for retirement if they can’t do it by using a direct paycheck deposit. His proposal, House Bill 79, would set up a new state committee in charge of creating that system for eligible workers and businesses to use.
Lowery said one potential hangup among fellow lawmakers is that it would cost around $1 million to create the new IRA system, which would be run by the Department of Commerce. But he said it would easily pay for itself by reducing the number of older people who would qualify for government assisstance when they hit retirement age.
Beyond helping individual workers save up for retirement and hopefully reducing government safety net spending, supporters of the bill say, it would also help small businesses be more competitive in hiring and retaining workers without having to pay for benefits such as a 401(k) plan.
Rep. Jeff McNeely, R-Iredell, is a small business owner with about 20 employees. He said he doesn’t offer many of the benefits that bigger companies give their workers, so to stay competitive he finds it necessary to pay higher wages instead.
For his business and many other small businesses across the state, McNeely said, a new program to help their employees access retirement savings would help them be more competitive when trying to hire the best talent.
“The backbone of America is small entreprenuers working hard to create something,” McNeely said, adding: “This is going to be another tool in my toolbox, and it’s going to be a really good tool. I could use it a lot.”