Black and Hispanic Americans would be able to use auto-IRA accounts to delay claiming Social Security benefits for somewhat greater lengths of time than White workers.The use of IRA accounts to delay claiming Social Security could boost benefit payments for a wide range of people.More than one-third of auto-IRA account holders across the country could delay claiming for at least two years, increasing their monthly benefit checks by nearly 14%, or more, for life.This delay in claiming would increase a worker’s monthly benefits by at least 7%, or by an average of $78 today 5 and by more in future years, for life. By 2050, more than half of workers nationwide with auto-IRAs could delay claiming Social Security by at least a year, from age 62 to 63 or older.If auto-IRAs had been implemented nationwide in 2019, assuming the same program specifications, 29.8 million individuals would access their auto-IRAs by 2050. Almost a million (about 990,000) Pennsylvanians would access their auto-IRAs by 2050 if a program had been implemented in 2019.

4) This brief uses a 6% default contribution rate and, in another change from the earlier report, uses the income and demographic characteristics of an actual state, Pennsylvania, which is considering establishing an auto-IRA program. (Some proposals, from AARP and others, would even extend the auto-IRA model nationwide and potentially to all workers, including employees at smaller firms and independent workers. In the past few years, California, Illinois, and Oregon have begun using a 5% default contribution rate, and other states are considering using a 6% default rate. 3 The earlier study, which assumed a 3% default contribution rate, showed that, by 2050, 39% of workers participating in state auto-IRA programs could delay claiming Social Security by a year or more, and 20% of retirees could delay claiming by at least two years. This brief updates earlier research by The Pew Charitable Trusts on auto-IRAs and Social Security. On the flip side, claiming Social Security benefits as early as age 62, when they first become available, leads to a large and lifelong reduction in benefits. Such an approach would allow them to delay claiming Social Security, significantly increasing their Social Security monthly benefits. Or IRA account owners who retire at age 62 could use their accounts as a short-term income source-funding the first months or years of retirement with monthly withdrawals from their IRAs in amounts equal to the Social Security benefit that they otherwise would have begun taking at age 62. For instance, they could convert their savings to annuities, or use the balances as rainy day savings to cover large repairs, medical bills, or other purposes. Since 2012, at least 20 other states, among them Pennsylvania, Virginia, and Wisconsin, have considered auto-IRA legislation.īecause IRAs help grow savings that can be withdrawn without penalty beginning at age 59½, offering state auto-IRAs to employees who wouldn’t otherwise have access to these accounts is an important savings tool, giving workers options as they reach retirement. Workers can change the contribution percentage to these auto-IRAs or opt out entirely.

In California, Colorado, Connecticut, Illinois, Maryland, New Jersey, and Oregon, private sector workers who don’t have access to workplace retirement savings plans are, or will be, automatically enrolled in auto-IRAs to which they contribute a preset percentage of their wages or salaries. Older and more highly educated workers are more likely to have access to a workplace retirement savings plan. 1 Black and Hispanic workers report lower access rates than White workers, and larger companies are more likely than smaller ones to offer a plan. This deferral has the potential to increase their monthly and annual benefits by 7%-8% a year for life.Ībout 42% of American private sector workers lack access to a workplace retirement plan such as a traditional defined benefit plan, a 401(k), or an IRA, while 49% participate in one. Pew found that workers who invested 6% of their wages in auto-IRAs could delay claiming Social Security benefits for a year or longer. Research by The Pew Charitable Trusts on individual retirement accounts (IRAs) with automatic enrollment, known as auto-IRAs or Secure Choice accounts, illustrates how retirees could use their auto-IRA accounts to delay claiming Social Security benefits, thereby boosting their monthly and annual payment amounts for life.

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