National universal access policies could dramatically close the retirement savings access gap for millions of employees and provide larger annual incomes for retirees, according to new research from the Georgetown University Center for Retirement Initiatives (CRI) in collaboration with Econsult Solutions, Inc. (ESI) and supported by a grant from the Berggruen Institute's Future of Capitalism program.

The CRI study examined several options for providing universal retirement savings access, including the effect of variables such as the type of account (payroll deduction Roth IRA or Roth 401(k)), exemptions for certain small employers, and voluntary versus mandatory employer contributions. These approaches would result in significant expansions of access and participation among the estimated 57.3 million private sector employees who are not offered any workplace retirement plan today. Modeling suggests that these approaches would increase the number of workers saving for retirement in the year 2040 by 28 to 40 million (depending on the chosen design features).

The research demonstrates the importance of workers beginning to save early through easy access to savings options. A young worker with a modest income who simply follows default savings choices for 40 years could generate as much as $14,320 and, if Congress would enact a refundable Saver's Tax credit, as much as $21,300, per year in additional income at retirement. Under these models, the total retirement savings in the United States would grow by between $1.4 trillion and $1.9 trillion in the year 2040.

The benefits of increased retirement savings go beyond individual savers and their families. The study found that universal access to retirement savings would add $72 to $96 billion to US GDP growth in the year 2040. Addressing the retirement savings crisis at a national level will also reduce the fiscal burden on government agencies that already face increased financial challenges because of the pandemic. Under the baseline Auto-IRA scenario considered, federal and state budgets could expect to see an annual savings of $8.7 billion in 2040 by reducing assistance needs for retirees without sufficient retirement income.

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