How Have Workers Responded to Oregon’s Auto-IRA?

Only about half of private sector workers are covered by employer-sponsored retirement savings plans at any given time, and few workers save without one. The net result is that roughly a third of retired households end up solely reliant on Social Security benefits, which were never intended to be their only source of income. In the absence of federal action to close the coverage gap, some states have passed legislation to implement auto-IRAs, which require employers who do not offer a retirement plan to automatically enroll their workers in an IRA-based saving program sponsored by the state. The primary goal of auto-IRAs is to improve retirement security among uncovered workers, who would automatically start to build assets through the program. In practice, the extent to which workers benefit will depend on how they respond – workers who do not opt out, save at a meaningful rate, and avoid raiding their nest egg before retirement for non-essential expenses will improve their odds. But those who opt out of the program, or participate but do not use the program to improve their overall financial situation, will not be better prepared for retirement. Therefore, to assess the overall impact of an auto-IRA, one would need comprehensive financial data for a household, including debt, income, and saving over a long period of time. But an early look can still be useful, so this brief examines the experience of Oregon to date, which recently became the first state to implement an auto-IRA program (called OregonSaves). The goal is to answer a limited question: how do workers who gain access to an auto-IRA initially interact with the program? The discussion proceeds as follows. The first section provides background on OregonSaves’ goals, design, and implementation. The second section describes the data used in the analysis. The third section discusses the initial results emerging from the early data. The final section concludes that the majority of eligible workers do participate and tend to stick with the default deferral rate. As more data become available, both on new participants and on current participants’ longer-term behavior, researchers should be able to assess the impact of OregonSaves on the overall financial status of participating households.