The Secret to Financial Security

LIVING YOUR BEST LIFE (AFTER 50)

We all know we should save for retirement early. But getting started can be challenging. Other states make it easy for workers to save money for a better future. Why isn’t Hawai‘i one of them?

If you want to live your best life as you age, financial security is crucial. Those of us fortunate enough to have pensions and 401(k) plans have the means to achieve financial security. But about half of all private-sector workers—an estimated 216,000 people in Hawai‘i— cannot easily save for retirement through their workplaces. If workers haven’t saved, they face two stark choices: retiring into poverty or working until they die.

Dennis Oda, former staff photographer at the Honolulu Star-Advertiser, began his career at a time when pensions were still relatively common and when his employer did away with its pension, he contributed to his 401(k) savings plan. “Everybody should prepare early and pay attention to your finances,” Oda says. His preparation allowed him to retire early when the paper asked for voluntary layoffs in June because of pandemic-related financial losses. That move helped save a co-worker’s job. Although the timing during COVID-19 wasn’t ideal, he says he’s doing OK because of his savings.

If Oda had not had a way to save for retirement at work, his situation today would likely be much different.

All of us would like to think that we will save enough money on our own to fund a comfortable retirement. But human nature and university studies suggest differently. Only 1 in 20 people will do the research and open individual retirement accounts on their own. The rest of us only save for retirement when it’s easy, when the money comes out of our paychecks before we get a chance to see and spend it.

But for many businesses, especially small businesses, it’s just too expensive and time-consuming to offer workers a

LIVING YOUR BEST LIFE (AFTER 50)

payroll savings plan.

“The retirement savings crisis in Hawai‘i and across the country is like a ticking financial time bomb,” says Audrey Suga-Nakagawa, AARP Hawai‘i’s advocacy director. “About half of all households are in danger of not being able to cover basic expenses in retirement and that will have significant consequences if taxpayers have to pay more to fund basic services for kūpuna who haven’t saved for retirement.”

Recognizing the problem, 12 states have come up with solutions to help small businesses, workers and taxpayers.

Making Saving Easy

Oregon was the first state to create a retirement savings program that small businesses could offer to employees at no cost to the businesses. The OregonSaves program has been operating for three years and as of September, more than 73,000 workers had saved more than $67 million. California and Illinois recently started similar programs and savings have passed $109 million in all three states.

The program is a public-private partnership, similar to college 529 savings programs. The state facilitates the startup, but the money is held and invested by private financial companies in either Roth or traditional IRAs. The state doesn’t keep any of the workers’ funds; instead, they’re held in individual worker accounts.

Workers can opt out of participating. In Oregon, the average worker contributes nearly 5.4% of their paycheck for an average monthly savings rate of $135.73. About 70% of all workers who are given the chance to save, open an account.

“What OregonSaves shows is that workers want to save money and if you give workers an easy way to save, they will take advantage of it,” Suga-Nakagawa says. “That’s why we need to start a Hawai‘i Saves program here.”

AARP Hawai‘i has been advocating for five years to create a Hawai‘i Saves program, but has been turned away every time because of opposition from life insurance and financial companies that see it as unwelcome competition.

Suga-Nakagawa says opponents of Hawai‘i Saves are being shortsighted.

“If financial services companies were actually servicing small businesses, there would be no need to create a savings program,” she says. “They aren’t helping small businesses and workers because there’s no profit for them in small accounts. But if they were to look forward, once people build a nest egg and learn about savings and investments, they will be a large market in five or 10 years.”

There’s another financial benefit to having more workers save money for retirement: Taxpayers will save money. An AARP study estimates that if workers save enough to generate $1,000 a year in extra income once they retire, the state would save $32.7 million in social services costs over 15 years and total state and federal savings would be $160 million in Hawai‘i.

A small business perspective

About two-thirds of Hawai‘i’s small businesses like the idea of a statefacilitated retirement program and

The Retirement Crisis by the Numbers

Workers are 15 times more likely to save if they can do so at work

$2,500 –the amount of savings the average household has for retirement

$14,500 – the amount of savings of the average household near retirement

$18,000 – the average annual Social Security benefit for a 65+ family

$20,000 – the amount older American families spend each year on food, utilities and health care

Learn More: action.aarp.org/ hisaves

LIVING YOUR BEST LIFE (AFTER 50)

The Secret to Financial Security Continued

say they would participate if it were offered.

“Hawai‘i Saves is something I would definitely want for my staff,” says Ernest Moriwake, co-owner of Kapahulu Auto Repair. The company currently has eight employees. “I was on the other side, working for other people and I didn’t have savings. Now when I look back, I wish I had started saving when I was young. My retirement is now my business.”

Deborah Miura, office manager at Kapahulu Auto Repair, says: “Small companies like us can’t afford to offer these things; payroll and rent are just the two largest factors that take away from your revenue. If we could offer something like Hawai‘i Saves, I think it’s a plus for so many people. It’s a benefit for employees and employers.”

Miura isn’t just speaking about others. She says she can’t afford to live off just her Social Security. Miura opened a retirement fund a few years ago and is focused on trying to grow it now, while she’s still able to work. “Kūpuna would have a hard time unless they have established themselves well with a retirement fund or have state or government benefits,” she says.

Deborah Miura and Ernest Moriwake of Kapahulu Auto Repair.

Fighting for Your Money

AARP Hawai‘i has a proud history of fighting to strengthen and prevent cuts to Medicare and Social Security, defeat efforts to tax pensions in Hawai‘i, lower prescription drug prices, prevent age discrimination, and improve retirement security. When Gov. Neil Abercrombie proposed taxing pensions in 2011, AARP Hawai‘i, our members and advocacy volunteers fought back and won. If you want to join our advocacy volunteers fighting to protect kūpuna and your money, email Advocacy Director Audrey Suga-Nakagawa at hiaarp@aarp.org