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Thought Leadership Thursday

Future of Retirement in Wisconsin

Sarah Godlewski

Thought Leadership Thursday Article

Future of Retirement in Wisconsin
July 21, 2022
Treasurer
State of Wisconsin

Dear Colleagues,

With summer now in full swing, many of us are spending more time outside with friends and family. Here in Wisconsin, we are enjoying the warm weather, spending time at the lake, watching the Milwaukee Brewers play, and eagerly awaiting the return of the Wisconsin State Fair. During the summer, saving for retirement is not always top of mind, especially for younger generations. Unfortunately, the retirement security crisis doesn’t take a summer break.

As the State Treasurer and a data nerd, I want to start with the numbers and statistics that illustrate the breadth and depth of the retirement problem in Wisconsin. Here are the facts:

  • Almost one million Wisconsinites between the ages of 18 and 64 do not have access to a retirement savings plan at work.
  • 38% of people between the ages of 18 and 29 have no retirement savings, and 46% of all Wisconsinites do not have a rainy-day fund to cover a financial emergency.
  • The average monthly social security benefit for a Wisconsinite in January of 2022 was $615.19 and these benefits are the sole source of income for 3 in 10 older Wisconsinites.
  • Families of color have less access to retirement savings vehicles, which contributes to the stark racial wealth gap in our state.
  • If Wisconsin were to take no action, over 400,000 seniors will be in poverty by 2030 and the state will have to spend an additional $3.5 billion on public assistance programs annually.

To address the growing severity of the retirement crisis, Wisconsin Governor Tony Evers created the Governor's Task Force on Retirement Security in 2019. As Chair of the Retirement Security Task Force, I was deeply moved by the personal stories from Wisconsinites that brought the reality of the retirement statistics to life. In February 2021, the Retirement Security Task Force announced five recommendations to tackle the issue faced by Wisconsinites across the state.

One of these recommendations was the innovative 401(K)ids program, which targets the youngest generations to help Wisconsinites avoid going into debt and build wealth from a young age. 401(K)ids is a ground-breaking idea that would set future generations up for success by providing every child born or adopted in the State of Wisconsin with an IRA-like investment account, which yields a higher interest rate than an ordinary savings account, seeded by the state. As any parent can attest, the last thing you’re thinking about when you’re in the hospital with a new baby is setting up a retirement savings account. 401(K)ids would help ensure that every baby in our state would have the same opportunity to start saving as soon as they’re born.

After it’s created, this account would be managed and invested by the state, and family members, friends, business groups, and the account holder would be able to contribute. When they hit age 18, the account holder would be able to access their savings for tuition or other educational expenses, for a down payment for their first home, for expenses related to a medical emergency, or for a different retirement savings plan. While the idea for 401(K)ids started with finding ways to make it easier to save for retirement and other big expenses, its potential is so much more than that.

401(K)ids will make it easier for Wisconsinites to start saving their own money at an earlier age and provide an opportunity for all kids, regardless of income, to start investing and learning more about the power of savings and compound interest. By providing a way to start saving at birth, we can help Wisconsinites provide for themselves and their families while also avoiding increasing costs of public assistance for senior programs. In addition, we know that Wisconsin has one of the highest racial wealth gaps in the country and that families of color have less access to retirement savings vehicles. 401(K)ids would help address this by giving every Wisconsinite the foundation for savings. It would also serve as a powerful experiential learning tool. Instead of simply talking about interest and savings as a hypothetical, children would be able to apply the financial literacy education they receive at school to their own investment account to make learning tangible. The ability to utilize the power of compound interest at such an early age makes 401(K)ids an important and influential idea.

This past spring, 401(K)ids was introduced before the Wisconsin State Legislature with bipartisan support and was even given a public hearing! This was a huge step forward that shows that legislators on both sides of the aisle are eager to take action and help Wisconsinites save for their futures. I am optimistic that legislators and Wisconsinites will continue to think about the retirement crisis and look for bipartisan solutions, and that 401(K)ids will be reintroduced during the next legislative session.

I know that many of you are looking for creative solutions to the retirement security crisis in your own states, and would encourage you to consider a 401(K)ids model. If you are interested in learning more about what we’re doing in the Dairy State or have any questions about the program, reach out to my office at 608-266-1714 or treasurer@wisconsin.gov.

Forward,

Sarah Godlewski
Wisconsin State Treasurer

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