In a time when employers are increasingly trimming or completely forgoing employee retirement benefits, political leaders in the country's largest state hope the government can help young workers take matters into their own hands.
Just as the individual marketplace created by the Patient Protection and Affordable Care Act (PPACA) seeks to make it easier for those without employer-sponsored health care to get insurance, a proposal being considered by California legislators would set up a state-run 401(k) plan for those whose employers do not offer retirement plans.
Just as it was entirely possible (and common) to buy insurance individually before the PPACA, setting up an individual retirement account is by no means impossible either.
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The problem is that millions of workers have not taken the necessary steps to plan for retirement. A recent study found that 45 percent of working-age households do not possess any retirement assets, such as a pension, 401(k), or IRA.
The meager retirement assets of younger workers is made all the more ominous by the fact that social security will likely not be able to guarantee the same level of retirement income as it has for their parents and grandparents.
California's potential solution would be a system in which employees who lack employer-sponsored retirement accounts would automatically be enrolled in the state plan, to which they could contribute between 2 percent and 5 percent of their wages, which the state would invest on their behalf.
The system would not be mandatory, but employees would have to take the step of opting out if they don't want to participate.
AARP, the influential advocacy group for retirees, is backing the plan, and a number of liberal groups will likely support it as well. Such interests hold great sway in the California legislature, currently controlled by Democrats.
"These are plans that would be set up for employees who have nothing," Karen Friedman, policy director for the advocacy group Pension Rights Center, told the LA Times. "It's a way of getting people saving. But we look at them as modest savings plans. They're not a replacement for good, old-fashioned pension plans."
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