Enhancing Retirement Saving in New Hampshire

A Final Report to the New Hampshire Voluntary Retirement Project
PRS Briefs
PRS Policy Brief 0607-03
Wednesday, January 31, 2007

In New Hampshire and throughout the United States, a significant portion of the population is not actively saving for retirement. Almost half of New Hampshire workers ages 21 to 64 are not enrolled in an employer-sponsored retirement savings plan. The overall effect of low retirement savings is dramatic: about half of working middle-class households are projected to run out of money at some point during their retirement years. This report highlights a variety of reasons why many people do not save enough for a comfortable retirement. Demographic factors that influence saving behavior include: education level, income level, age, and gender. Economic and non-economic explanations for Americans' lack of saving are also offered. For example, access to employer-sponsored plans, retirement plan design, and psychological factors all affect people's ability and decision to save for retirement.

This report presents federal, statewide, and employer-based "best practices" savings promotion efforts that have the potential to enhance retirement security in New Hampshire. Federally sponsored measures include the Saver's Credit and the Pension Protection Act of 2006. On the state level, a handful of states, including Michigan, Washington, and Vermont, have proposed legislation to create statewide retirement savings account systems. The report also references New Hampshire's 529 college tuition savings plan as an example of an existing state-sponsored savings plan. Employer practices that work to boost retirement plan participation and encourage saving include automatic plan enrollment and financial education through targeted seminars. Additionally, high school financial education programs exist to teach teenagers the basics of personal finance.

Based on considerations from academic sources, case studies, and first-hand testimonies, this report offers retirement saving policy options that the New Hampshire state government can implement within both the public and private sectors as well as through a public-private partnership. In the public sector, New Hampshire can create a statewide retirement savings account system, facilitate saving among low-income residents by modifying the asset tests of means-tested benefit programs, and utilize the services of the federal Office of Financial Education. Private sector policy options include promoting effective retirement plan designs that encourage participation and savings, and educating employees about how and why to save for retirement. Under a public-private partnership, the state legislature can work with local Chambers of Commerce to encourage best practice plan designs and initiate relationships with private foundations, organize a media campaign to promote retirement plan participation, and encourage financial education programs in high schools and universities.