A record number of Americans are reaching retirement age this year, marking the start of an unprecedented surge in Americans turning 65 that will last through roughly 2027, and bringing issues related to life after work to the forefront for individuals and policymakers. Financial security is of particular concern. Although the retirement savings gap—the difference between what workers have set aside for retirement and what they will need—has improved in recent years, studies have consistently found that most Baby Boomers haven’t saved enough and will probably have to rely primarily on Social Security and Medicare as they age.
The wave of people leaving the workforce also affects the public sector, with the associated fiscal and policy strains increasingly viewed as a present-day crisis. The Pew Charitable Trusts estimates that by the end of 2040, insufficient retirement savings will have cost states and the federal government a combined $1.3 trillion since 2021 in increased public assistance spending, administrative costs and reduced tax revenue. Meanwhile, the working-age population, which provides most of the tax revenue needed to pay for such costs, is unlikely to keep pace with the workforce losses, growing only modestly over time.
In response, state-run automated savings programs for private sector workers—also known as auto-IRA or work-and-save programs—have gained traction nationwide as an effective solution. In 2023 alone, three states—Minnesota, Nevada, and Vermont—passed legislation authorizing auto-IRA programs. They were followed by Rhode Island and Washington in 2024, bringing the total number of states with such legislation to 17. These initiatives allow employers that didn’t previously offer retirement savings plans to provide low-to-no-cost benefits for their workers. As their name implies, auto-IRA systems automatically enroll employees into individual retirement accounts, and, once enrolled, workers can choose to make regular contributions through payroll deductions.
Beyond Individual Savings
Employees are able to opt out of auto-IRAs at any time, but the participation rate has been encouraging. Oregon Saves, the country’s first program, launched in 2017, and since then, approximately 75% of employees who were enrolled have elected to stay—with at least 152,000 workers setting aside about $312 million to date. Nationwide, seven auto-IRA programs are now operating and reporting data, and across those, at least 915,000 enrollees have socked away $1.7 billion in retirement assets.
The benefits of auto-IRA programs extend beyond personal savings. For instance, Washington State Treasurer Mike Pellicciotti has highlighted that his state’s program not only is “a cornerstone for wealth building and the long-term financial health for generations of Washingtonians” but also is vital for the state’s fiscal well-being, helping to lessen the burden of a projected $3.9 billion increase in spending on services for aging residents through 2040 that is tied to insufficient retirement savings.
Nationally, the strains on state budgets associated with the retirement surge are particularly evident in rising health care costs. Medical expenses for Americans over 65 are almost four times those for 20- and 30-year-olds. Further, older Americans are more likely than working-age individuals to live in low-income households and to rely on Medicaid for their health care. For these reasons, an aging population creates twin pressures on Medicaid—and state budgets—through higher enrollment and higher costs per enrollee.
