Are Retirement Plans Mandatory?

America is facing a retirement crisis. Are company-sponsored retirement plans mandatory? Learn what’s being done to protect the American people in retirement.

A secure retirement requires planning and foresight. Many working Americans have access to employer-sponsored retirement plans, like 401(k)s, often with employee matching included. But, is a retirement plan mandatory? And should you only work for companies that provide retirement benefits?

There is a retirement crisis in America

More and more Americans are unprepared for retirement and are critically undersaving for their futures. This is due to many reasons including but not limited to:

• Americans being underemployed
• Americans having to work more than one job to make ends meet
• The continuing disappearance of the middle class
• Many companies taking away retirement perks, like pensions
• The scarcity of unions
• Less societal and government support

Because of this, many Americans may never retire or will have to continue to work well past the established retirement age of 65. Healthcare costs continue to rise, many are living longer, and economic crisis after economic crisis (the Great Recession, effects from the COVID-19 pandemic, etc.) have caused all generations from Millennials to Baby Boomers an insecure future.

Company-provided retirement plans lead to greater financial success

Studies continue to show that employees are more likely to save for retirement if their employer offers access to a retirement plan. Even if the companies don’t offer a match, the ease of having an account set up through HR is a big reason why millions of Americans have any money saved for retirement. While many companies offer retirement benefits, 4 in 10 employers with less than 100 team members offer those options.

Retirement savings plans can often be a “set it and forget it” type of deal, until employees reach their 40s or 50s, as that’s when most start seriously thinking about retirement. But, the younger you are, the better it is to start saving for retirement immediately. Compound interest is your best friend for a successful retirement. It’s recommended to put 10-15% of your salary into a retirement account, including company matching (if any).

Are retirement plans state-mandated?

In short, yes and no. There are currently 10 states that have enacted legislation to establish state-mandated retirement plans. These states include:

• California
• Connecticut
• Illinois
• Maryland
• Massachusetts
• New Jersey
• New York
• Oregon
• Vermont

Each of these ten states have their own stipulations for company-sponsored plans. For example, California requires employers with at least 5 employees to offer a retirement savings plan through the private market or through the state’s Roth IRA plan.

To date, over 30 states have introduced legislation for state-mandated plans.

Retirement planning needs to happen now

Because the majority of states do not require employers to offer retirement plans, the responsibility is yours. Americans have choices like investing in the market, opening IRAs, and more without their company’s help. Retirement planning is tricky and even those who do work for a business with a retirement benefits plan and matching program often need additional help from a financial advisor. Talk to an advisor who can help you with your goals and determine the steps you need to take today to retire comfortably.

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