LINCOLN — The number of Nebraska workers whose employers offer pension or 401(k) plans to their workers has declined significantly over the past decade or so, leaving more and more families financially unprepared for retirement.
That could be bad news for the State of Nebraska as well — increasing its costs for serving the elderly.
Nebraska lawmakers heard that warning Tuesday from officials with AARP and the New School in New York City. The officials said the decline in private retirement savings plans will put more stress on state resources, which already provide about $373 million a year in Medicaid services to Nebraskans over age 65.
“As things stand today, Social Security will likely be the main source of retirement income for most future middle-class retirees,” said Sarah Mysiewicz, a senior legislative representative in AARP's Washington, D.C., office. Without additional private savings, she said, those retirees won't have enough to pay their bills.
In 2012, 43 percent of Nebraska workers were not offered retirement savings plans by their employers, Mysiewicz told members of the Legislature's Retirement Systems Committee.
Eleven years earlier, just 34 percent of workers in the state lacked an employer plan.
Teresa Ghilarducci, an economist at the New School, said about one-fifth of businesses nationally dropped retirement plans during the recent recession.
Mysiewicz suggested that Nebraska consider launching a state-sponsored retirement savings plan for workers. Such plans could be administered directly by the state or by an outside contractor, like Nebraska's 529 college savings plan, which is run by First National Bank of Omaha. A recent AARP survey found support for such “State K” plans.
“AARP believes that Nebraska cannot afford to not take action,” Mysiewicz said, to address what she called “an unprecedented crisis in retirement savings.”
Jeff States, Nebraska state investment officer, told lawmakers that a state-sponsored retirement plan would cost workers as much in administrative costs as plans offered through private investment firms.
But Ghilarducci said a state-sponsored plan could still boost retirement savings by making it easier for workers without an employer plan to put aside money.
According to Mysiewicz, the typical working-age household has only $3,000 in retirement assets, while near-retirement households have only $12,000. She said three out of five American families headed by a person 65 or older have no money in retirement savings accounts.
In Nebraska, about 20 percent of senior citizens rely on Social Security to provide 90 percent of their family income, Mysiewicz said.
State Sen. Jeremy Nordquist of Omaha, chairman of the retirement committee, said the state needs to explore its options in dealing with the lack of adequate retirement funds for senior citizens. He did not expect a bill to be considered in the 2014 session, which begins in four weeks.