We all know we need to save for retirement. However, as with many good intentions, life’s happenings often get in the way.

Many of us have the opportunity to save through a retirement plan offered by our employer. For most small businesses, though, setting up a retirement plan is just too costly. While our federal government seems to be dancing around major retirement issues, 30 states are looking at setting up plans to help employees save for retirement.

These programs involve automatic deductions from employees’ paychecks into an IRA. The new program in Illinois, for example, has 3% of each employee’s paycheck going into a state-run Roth IRA. Of course, workers can opt out of the program.

This program in Illinois still needs to be approved by the Department of Labor and the IRS, yet it looks to be a good prototype for programs in other states or maybe even a national program.

The question arises: Why would states want to set up automatic retirement programs? The answer is simple: money and statistics. Statistics show that 90% of workers who have access to a retirement plan at work are saving for retirement. On the flip side, only 20% of workers without a plan save for retirement.

What does that mean for the states? If you have money set aside for retirement, you are less likely to need services such as Medicaid and welfare, which are both drains on state budgets. Consequently, the more people who save for retirement (and the more they save), the less the states will need to spend on caring for those people. In the long run, that’s good for everyone, especially for our children and grandchildren.

Is it beneficial to us as individuals to have automatic retirement savings plans? Definitely! It makes sense that if the savings come out before the paycheck hits our pockets, we’re just more likely to save. Granted, 3% savings is way below the 10% to 15% that is most often recommended, yet it is a definite start in the right direction.

Even if you don’t have access to a retirement plan at your work, you can still start saving (or save more) for your retirement. Set up an IRA and have money automatically taken out of your bank account as soon as your paycheck is deposited. It won’t take long before you won’t even miss those amounts that are being deducted from your bank account. And, over time, those seemingly small amounts can add up to a nice retirement fund.

Happy saving!

Judith Ackland has more than 26 years of experience in accountancy and financial planning, including seventeen years as a CFO of a diverse business. She started Crystal Financial in 2010 to help a wide array of individuals, families, and business owners better understand their finances and how good financial management could help them achieve their goals. Judith has an MA in Professional Accountancy from the University of Nebraska at Lincoln as well as a Certified Public Accountant Certificate and a Certified Financial Planner designation.

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