America’s middle class has a retirement problem. Many people have too little savings outside of Social Security to stave off financial hardships in their old age. They will have to make difficult choices between paying medical bills, affording food, and paying their mortgage or rent—that is, unless policymakers act to help people save more for retirement.
Challenges in saving for retirement
The underlying problems are well-known. First, and most importantly, only about half of private sector workers participate in an employer’s retirement plan, such as a defined benefit (DB) pension, a 401(k), or an individual retirement account (IRA). This follows mainly from a lack of access to employer-sponsored retirement benefits such as DB pensions or 401(k) plans. “Access” refers to working for an employer that offers such a benefit and qualifying for it by working for a long enough tenure and for enough hours. According to National Compensation Survey data from March 2025, 72 percent of all private sector workers had access to a plan. The same survey found that only 53 percent of private sector workers participated in a plan.
In theory, workers who do not have access to an employer-sponsored retirement plan can sign up for an IRA, but few do. Current rules for conventional IRAs, unlike for 401(k)-type accounts, do not provide for an automatic enrollment mechanism, leaving it up to individuals to make all the choices necessary to save for retirement. Complex rules, constraints on people’s time and resources, a lack of understanding, and inertia then all contribute to low take-up rates of IRAs.
Second, even when people have a retirement benefit through work, they often do not have enough savings for a comfortable retirement. Low earnings are one reason for limited retirement contributions. In a 2024 survey by The Pew Charitable Trusts, one-third of respondents said that they rarely or never “have money left over at the end of the month.” In addition, the tax code showers the largest tax benefits for retirement savings on the wealthiest taxpayers, rather than on those who struggle with saving in the first place.
The third challenge in saving for retirement is that life can get in the way of building assets for the future. People experience competing financial needs and unexpected emergencies that require them to tap into their savings during their careers. These include health issues, family members who need help, or divorces, as well as major expenses such as purchasing a home or car. Even when they do save, people often target funds to emergencies or short-term goals rather than locking away their money for retirement. This is understandable and necessary, but it also leaves people vulnerable to financial insecurity in retirement.
The challenges of saving for retirement—lack of access, limited benefit from federal tax incentives, and greater exposure to adverse financial shocks—are unevenly distributed. Black/African American and Hispanic/Latino workers, women, and workers without a college degree are more likely to face these hurdles than are white workers, men, and those with a college degree.
Congress can and should act to help people better prepare for retirement. Economic research has shown that many people will not save enough for their retirement, which is often decades away. Congress and state lawmakers have instituted a range of policies over the decades to help people save more.
Giving people more access to a retirement savings plan is arguably the biggest challenge. Policymakers in several states have tackled this issue with some success, and currently, 17 states have enacted state-sponsored auto-IRA programs for workers who do not work for an employer that offers a retirement benefit. Under these programs, eligible employers that do not offer their employees a retirement benefit instead automatically enroll them into a state-administered program that puts a predetermined share of earnings into an IRA. States typically have third-party providers with the necessary expertise to manage the investment, recordkeeping, and other aspects of the plan. As a result, workers can invest at no cost to their employers—and workers can always opt out if they prefer not to participate. By September 2026, 1.4 million worker accounts existed in state auto-IRA programs with a total of more than $3.4 billion.
These auto-IRA plans are a good first step toward ensuring all workers have retirement savings, but most states do not offer such programs. The proof of concept is already here. Congress can build on state auto-IRA programs to make meaningful inroads toward greater retirement security.
The proof of concept is already here. Congress can build on state auto-IRA programs to make meaningful inroads toward greater retirement security.
Congress should expand state auto-IRA plans into a national program
In a proposal earlier this year, Robert Pozen, a distinguished senior lecturer at the Massachusetts Institute of Technology, and Mark Iwry, a former U.S. Treasury Department official, advocated for Congress to take a key step to expand the reach of auto-IRAs to all states. They proposed that Congress should enact legislation that would require employers without a retirement plan to create one or join a state-sponsored auto-IRA plan. States without existing programs could either create their own or allow employers to join another state’s program.
Employers would have limited responsibilities. They would need to set up payroll deductions into state auto-IRA plans, but they would not become fiduciaries and would not have to choose investment options for their employees or make their own contributions to these accounts. Employers that participate in state programs, therefore, do not have to navigate compliance with regulations related to fiduciary responsibility. If employers do not or cannot set up their own retirement plans, they simply would facilitate access to retirement accounts for their employees.
Congress should help small employers cope with the burden of increased paperwork as part of legislation to give all employees access to a retirement plan. Earlier proposed legislation, as Pozen and Iwry point out, included tax credits for small employers to help with the associated start-up costs. And rather than enroll their employees in a state-sponsored auto-IRA plan, some employers started their own retirement plans, such as 401(k) plans, when states started their programs.
Requiring employers in all states either to offer their own plans or to create/join an auto-IRA program could address a key issue related to existing state-sponsored auto-IRA programs. Workers often move across state lines during their lives, which means they may move from a state with an auto-IRA to a state with another auto-IRA or without one at all. This interrupts workers’ progress toward retirement security. This would no longer happen if all states had a state-sponsored retirement savings option, thereby ensuring workers would always have access to a retirement benefit.
A logical extension of Pozen and Iwry’s proposal would be to create a national clearinghouse for accounts in state-sponsored retirement plans. The clearinghouse would be responsible for tracking workers’ accounts across states and recording those accounts in a national database. That way, accounts would be less likely to become “orphaned”—forgotten as workers switch jobs or move between states. A national clearinghouse would be good policy whether auto-IRAs were a federal or a state-level program. Creating a national program to expand access to state-level plans would force the issue and advance the creation of better national infrastructure for retirement savings.
Pushing all states to offer some state-sponsored retirement savings options to workers whose employers do not offer retirement benefits would have a crucial advantage over a single nationwide plan. States could provide their own plans with their own specific investment options, contributions, and withdrawals, as well as distinct branding. What is good for Massachusetts may not be good for Mississippi and vice versa.
An important step toward securing retirement for America’s middle class
In adopting a nationwide, state-based program, Congress would need to tackle some key questions associated with auto-IRAs. Policymakers would need to decide on the size of employers to whom this legislation would apply. They would have to establish universal parameters for costs, investment risks, and tax treatments. They could also tackle the issue of retirement income, specifically whether people could get a low-cost stream of income—an annuity—when they retire. The goal would be to give states some flexibility in the design of these auto-IRAs, while minimizing costs and risks for workers and their retirement savings.
Other steps toward bolstering retirement security, such as reforming the tax code and providing people with more emergency savings, are important, but they depend on people having a retirement plan in the first place. Crucially, the proposal above prioritizes access to retirement plans. Making auto-IRAs available nationwide is a good step toward improving such access. Importantly, as Pozen and Iwry point out, there is bipartisan support for increasing access to retirement savings plans.
Important next steps could and should follow, including tax reforms to provide more benefits to those who need help. Expanded early access to retirement savings in emergencies could also be part of the discussion. The SECURE 2.0 Act already made it easier for people to access their retirement savings in a disaster, but Congress could push further in this direction. And Congress must make sure that more people have a secure stream of income in retirement, as society is aging. Congress has its work cut out for it in securing retirement for America’s middle class. Creating access to retirement savings for all is a good and doable first step.