Retirement security wasn't the only selling point when Pennsylvania Treasurer Joe Torsella called for a state-facilitated automatic individual retirement account, or auto-IRA, program, to counter the commonwealth's private-sector retirement security crisis.
Pennsylvania's aging population has budget implications.
'Without these measures, it will cost not only our retirees, but it will cost the Pennsylvania government billions," Torsella said in Harrisburg on Wednesday while releasing the findings of the
According to Torsella, unprepared retirees within the commonwealth will need an additional $14 billion in social services over 15 years.
Pennsylvania is in the early surge of a large wave of workers entering retirement. It has the fifth-largest percentage of population over 65 in the U.S. while the number of seniors in the commonwealth population — defined as persons aged 65 to 74 — will increase by 573,000 between 2010 and 2025, to 1.5 million.
According to Torsella, a state-facilitated auto-IRA, modeled similarly to the PA 529 college and career savings program, would allow private employers not offering any retirement savings the opportunity to provide access to portable savings options.
This approach, he said, would be at no cost to employers, and also allow voluntary participation by independent contractors, consultants, gig workers and other self-employed individuals. The program would be self-sustaining over time, Torsella said.
The state legislature would have to approve the measure. Torsella, speaking to reporters in Harrisburg, cited bipartisan support.
"Pennsylvania needs to deal with fundamental challenges. One of them is the costs of its aging population," said Sen. Pat Browne, R-Allentown. "They affect the budgetary process."
California, Connecticut, Illinois, Maryland and Oregon are among the states with auto-IRAs.
"It's a good way to counter the expenses of an older population," said Alan Schankel, a managing director at Janney Capital Markets in Philadelphia. "Pennsylvania's population is certainly older than that of the U.S."
In addition, Pennsylvania does not tax retirement income, which puts more of a burden on the workforce that pays one of the commonwealth's largest taxes, the income tax. Also, less disposable income diminishes sales-tax revenue.
The shifting consumption patterns of the aging population from taxable goods to nontaxable services figures to strain Pennsylvania's non-motor revenue totals through fiscal 2024, according to the nonpartisan Independent Fiscal Office.
