It’s appalling to see that Florida has the lowest rate of worker’s savings in employer sponsored retirements plans and the private sector has not done a good job marketing these relatively cheap and easy ways for employees to save for a nest egg as there are many ways to save even a small amount.
Take the example of Hands on Broward, nonprofit group employees,l-r, Jennifer Udan, Sander Schrantz, Brittney Copeland, Kristina DaSilva, Chelsea Wilder,CEO, Dale Hirsch and Rebecca Schultz. The charity decided to eliminate the 401k contributions so it could still offer free healthcare to its 6 full-time employees.
Florida is at the bottom when it comes to workers participating in a employment-based retirement plan — which may further strain social service programs in the years ahead.
Already, a record number of impoverished Floridians 65 and over, are receiving food stamps and Medicaid than ever before, according to the state’s December statistics. This shows that our current state government failed to solve the problem and also the private sector.
It even gets worse with Florida having the lowest rate in the nation of workers, from 21 to 64, qualifying for a pension or saving for retirement at their jobs, according to the nonprofit Employee Benefit Research Institute.
Just 43.7 percent of the Sunshine State’s full-time, full-year workers participated in an employer-based retirement plan, the institute reported last month.
Most Floridians aren’t in large corporate or government jobs that offer pensions, and many others can’t afford to save from their low wages for their retirement, said Craig Copeland, author of “Retirement Plan Participation Lowest in the South, West.” Having lots of jobs is not good if they are all low paying ones.
“They need to put food on the table,” he said.
Even if some Floridians wanted to contribute to a work retirement plan, they don’t have the opportunity, Copeland added.
In contrast, West Virginia has the nation’s highest rate of workers being part of retirement plans — nearly two thirds — thanks to the state having a large number of middle-class federal employees and trade union workers, Copeland added.
Florida has mostly small companies, which are the least likely to offer employees a way to save for retirement, Copeland said.
Dr. Stanley Krugman, a South Miami dentist, is one of the employers who doesn’t offer a retirement plan. He blames South Florida’s bad economic times.
“I keep the costs down to patients,” he said. “Everyone is hurting right now. Everyone is scrambling.”
But Boca Raton financial planner Mari Adam said small businesses can set up a Savings Incentive Match PLan for Employees (SIMPLE) IRA retirement plan for little or no cost that benefits their employees — and themselves.
Still, Krugman and many other small employers don’t want to be bothered with the paperwork and bookkeeping they fear would be part of such a benefit, such as a 401k retirement plan that requires annual reports that the SIMPLE IRA doesn’t.
“It’s simpler as it is,” Krugman said, adding “Everyone wants to get out of the bureaucracy.”
In hard economic times, workers also opt for health care and other immediate benefits over the long-term benefits of saving for retirement.
What’s important is people save on a regular basis to ensure they will have money for a rainy day — and their Golden Years, said Plantation financial planner Ben Tobias.
An IRA that can be set up at a bank or large financial institution, may be better than some 401k plans that offer few investment choices, he said.
But, Tobias added, “it’s foolish not to put money in when employers match contributions. That’s free money.”
Another incentive: Lower income workers may qualify for Retirement Savings Contribution Credits that can be used by couples who earn less than $56,500 a year or $28,250 for single filers, said Michael Dobzinski, a Plantation-based spokesman for the Internal Revenue Service. This credit could be worth up to $2,000 for a couple or $1,000 for a single filer; it can be used for any retirement account, including a 401k or IRA, he said.
Workers need to save for their retirement — otherwise they won’t have a nest egg needed to supplement monthly Social Security checks, said William B. Stronge, an economics professor emeritus at Florida Atlantic University.
An increasing number of older Floridians with no savings will further strain federal, state and local social services, economist Stronge said.
“They’ll be looking for social assistance before they retire,” he added.
The number of people 65 and over receiving food stamps has jumped 35 percent in just two years, from December 2009 to last month, according to her agency’s statistics. That’s nearly 75,000 more than the 210,904 receiving food aid in December 2009.
And future retirees may not be able to count on all the current social programs offered to the elderly.