An AARP press release said the study, conducted by Optimal Benefit Strategies, LLC, estimated 47.9 million Americans will be eligible to participate in an Automatic IRA through an employer, with 50% of these individuals having adjusted gross income under $20,000.
The study projected that a $l,000 annual contribution to an Auto IRA, at a 4% annual return, would yield $3l,000 of savings after 20 years and $58,300 of savings after 30 years.
The study added that analyses have already shown that automatic enrollment 401(k) plans increase employee savings participation rates “quite dramatically,” according to the document.
“Most Americans battle with the desire to spend but the necessity to save,” said Tom Nelson, Chief Operating Office at AARP, in the news release. “Automatic enrollment in an IRA would encourage saving and simplify the decisionmaking process of planning and saving for retirement.”
According to the news release, the Senate bill is sponsored by Senators Jeff Bingaman (D-New Mexico) and Gordon Smith (R-Oregon) and in the House by Representatives Richard Neal (D-Massachusetts) and Phil English (R-Pennsylvania).
Under the Automatic IRA proposals, employers with more than 10 employees, who have been in business for at least two years and who do not currently offer a retirement plan for their employees, would facilitate direct-deposit payroll deductions to an IRA at a financial institution. The employer would not contribute to such an account.
The bills provide for a temporary employer tax credit to offset administrative costs.
The AARP study is at http://assets.aarp.org/rgcenter/econ/auto_ira.pdf.