Roughly half of American private sector workers don’t have a retirement savings plan at their jobs. But it’s not by choice. Eighty-four percent of these workers don’t have access to plans.
And educators aren’t immune. Only one-fifth of early childhood teachers have a retirement plan, according to the National Child Care Staffing Study. Unlike most elementary and secondary teachers, many early childhood teachers aren’t public workers and aren’t eligible to participate in their state’s teacher pension plan. (They also earn significantly less in salary.)
The federal government now offers a low-cost retirement option called, my retirement account or myRA. There’s no minimum amount and workers who don’t have a 401k or pension plan can set-up automatic deductions from their paycheck into a myRA account. Once in the account, the savings are invested in bonds backed by the U.S. Treasury. While this won’t yield high investment returns, it is a safe bet and has no fees.
One drawback, however, is that workers have to choose to sign up for myRA on their own initiative. And Americans aren’t very good at saving. Yet, empirical research, shows that automatically enrolling or nudging employees into a plan (while still allowing them to opt out) is a much more effective way to boost participation.
Teacher pension plans expose teachers to attrition risk--the possibility that a teacher won't stick around long enough to qualify for the larger benefits waiting for those who stay.
