AARP OUTREACH: Financial planning for the future

by Japhet Els

Three glass Ball jars were arranged on the kitchen table. From my perspective as a nine-year old, they seemed large. One jar was labeled, “College Fund.” Another, “Short-Term Savings.” And the last jar, “Long-Term Savings.” My mother was pretty straight-forward and the labels reflected her simplicity in teaching the basics of money.

“With each dollar you earn, you’ll have to put at least 25 cents into the college jar. And another 25 cents into the long-term saving jar. After that, it’s up to you.” I didn’t realize it then, but my mother was teaching me the habit of how to save money. Three jars. Three goals. Three ways to build some security for the future.

I was lucky. Not everyone is taught these lessons early on, but it’s never too late to learn.

Maine is facing a retirement savings crisis that could put us on the financial mat in the near future. One-third of Mainers 65-plus rely entirely on their Social Security check which averages just $1,100 a month. The average working Maine household has just $2,500 in retirement savings. That’s not a nest egg. It’s barely an emergency fund. Shockingly, 46 percent of all private sector workers in our state don’t have access to a retirement savings program through their workplace, often because they work for a small business that doesn’t have the time or money to shoulder that burden.

The coming wave of financial insecurity will not only stress Maine families, but important programs like Social Security and Medicare, too.

Retirement savings participation hasn’t changed much in more than 40 years. Despite education campaigns and awareness efforts, there’s been only a slight increase in the number of workers putting money away in a retirement account since the 1970s.

So what can be done? It’s not just about educating younger workers, or giving them a “kick in the pants” to do the right thing. We know what works when it comes to saving for the future. U.S. workers are 15 times more likely to save for retirement when we can do so through our own paycheck. We’re 20 times more likely to do so if that savings is automatic.

The good news is there’s a solution and it is building momentum. LD 594 is a bill currently working its way through the Maine State House. It would establish a public-private partnership allowing any Mainer not currently offered a retirement program through their workplace to start saving for their future. Here are the key parts of the bill that we think make it a “no brainer:”

• No requirements or burdens on the small business owner including no liability and no matching requirement.
• Smart government opens up new markets, enabling businesses to connect with underserved consumers. LD 594 would finally allow small business employees the chance to save with approved financial institutions who are currently out of reach for the typical Maine worker.
• Portable: The employee retirement account follows the employee from job to job making it easier to save for seasonal workers and part-time workers.
• Education: Each employee who participates will learn the value of saving for the future, even if at first the savings are small.

Helping more Mainers save for retirement is a rising tide that lifts all boats. This isn’t just a personal finance issue, it’s a state and community finance issue. Maine spent $28 million on vital social services for older Mainers in 2016. This number will only go up as more and more Mainers age with fewer and fewer dollars saved for retirement. If we can make it easier for more working Mainers to save for the future, it will mean more savings for taxpayers in the future.

The bottom line is we can either pay a little today or a lot tomorrow. We can either work on smart policy to modernize retirement savings in the nation’s oldest state, or we can point the finger at educators and parents while doing nothing to address the problem.

We (and you, dear Reader) can do something. Call and email your local state legislator and urge them to support LD 594. It’s common sense legislation for Maine workers, and common sense savings for Maine’s future.

We may be the oldest state, but we’re primed to lead the way on the most important issues facing our multi-generational communities. We owe it to those who’ve helped shape the Maine of today through hard work and grit, to continue to develop and build the Maine of tomorrow.

Japhet Els is Outreach Director for AARP Maine.