“The Benefits and Alternatives of State-Sponsored Retirement Plans”

“`html

What Are State-Sponsored Retirement Plans?

State-sponsored retirement plans provide an alternative for self-employed individuals and employees whose jobs don’t offer retirement plans. These plans are managed by state retirement boards in collaboration with IRA administrators. Most state-administered plans are Roth IRAs, though some states offer traditional IRAs as well.

In some states, employers are required to participate if they don’t offer their own retirement plans. Employers who choose to participate simply enroll employees and manage payroll contributions. Enrollment is automatic, hence the term “auto-IRAs.” If your employer participates, you’ll be automatically enrolled, but you can opt out if you wish. These plans are portable, meaning you can keep your IRA or roll over the funds if you change jobs or move to another state.

Benefits of State-Sponsored Retirement Plans

State-administered retirement plans offer several advantages:

• Ease of Use: Automatic enrollment means you don’t have to take any action to start saving. Even self-enrollment is straightforward.
• Options: You can choose from various investment options and adjust your contributions at any time.
• Portability: You can keep your IRA even if you change jobs.

Where Are State-Sponsored Plans Available?

State auto-IRA plans have been enacted in 15 states, including California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Minnesota, Nevada, New Jersey, New York, Oregon, Vermont, and Virginia. Not all plans are active yet, but states typically roll out implementation in stages, starting with larger employers.

As of September 2023, the following states have active auto-IRA plans: California, Colorado, Connecticut, Illinois, Maryland, Oregon, and Virginia. Maine is scheduled to pilot its program in October 2023, and Delaware in January 2024. Other states are still developing their implementation timelines.

How to Enroll in a State-Sponsored Retirement Plan

If your employer participates, you’ll be notified of your automatic enrollment. You generally have three options:

• Do Nothing: Contributions will be made automatically, usually between 3% to 5% of your wages. You can adjust these amounts anytime.
• Opt Out: You can opt out by phone or online.
• Customize Your Account: Choose from savings and investment options, adjust your contribution, select a beneficiary, or make a withdrawal.

If you’re self-employed or your employer doesn’t participate, you can sign up at your state’s plan website. You’ll need to provide a Social Security or taxpayer identification number, birthdate, contact information, and bank information.

Alternatives to State-Sponsored Retirement Plans

If a state-sponsored retirement plan isn’t available or you prefer not to participate, consider these options:

• Traditional or Roth IRA: Open an IRA at a bank, credit union, or brokerage. Traditional IRAs are pretax, while Roth IRAs are post-tax with tax-free withdrawals.
• Health Savings Account (HSA): Save pretax money for medical expenses. Some HSAs allow investment of savings. You need a high-deductible health plan to open an HSA.
• Solo 401(k): Self-employed individuals can set up one-participant 401(k) plans with higher contribution limits than IRAs.
• Simplified Employee Pension (SEP)-IRA: Designed for self-employed individuals, SEP-IRAs allow higher contributions than traditional or Roth IRAs.
• Investing: Consider investing in stocks and bonds if you have an emergency fund and minimal debt. Online brokerage accounts and robo-advisors can help manage your investments.

Retirement Savings Made Easier

If you don’t have a workplace retirement plan, a state-run retirement plan is an easy way to start saving. Regular contributions, no matter how small, can significantly impact your retirement. Additionally, paying bills on time and minimizing debt can help you save more for retirement and improve your credit.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you achieve your financial goals.

“`