Is your retirement hanging by a thread? Millions of Americans are facing a future where they can't afford to retire, simply because they don't have access to a workplace retirement plan. But there's hope on the horizon, and it's coming from an unexpected place: state governments.
The landscape of retirement savings is shifting, with states stepping up to fill a critical void for private-sector workers. Minnesota and Hawaii are the latest to join a growing list, becoming the 17th and 18th states to offer state-sponsored retirement programs. These programs are designed to help those without access to a 401(k) or similar plan at work save for their golden years directly through their jobs. Minnesota's Secure Choice program launched on January 1st and will begin enrolling workers on January 19th. Hawaii is expected to launch its program later this year.
Here's the gist: these state-run initiatives generally require most employers (excluding the very smallest) to either offer their own retirement plan or automatically enroll their employees in the state's program. But here's where it gets controversial... Some argue this is government overreach, forcing businesses to participate. Others see it as a vital safety net. Where do you stand?
While each program has its nuances, the core mechanics are similar. Employees are typically automatically enrolled in Roth Individual Retirement Accounts (IRAs) through payroll deductions, usually starting with a contribution of 3% to 5% of their salary. Of course, employees have the option to opt out if they choose. The best part for employers? There's generally no cost to them, and these auto-IRAs are managed by professional investment companies.
According to research from the Economic Innovation Group, a bipartisan public policy organization, an estimated 53.7 million full-time and part-time workers between 18 and 65 lack access to an employer-sponsored retirement plan. These state-run programs are trying to bridge that gap – and they're having an effect.
As of the end of 2025, workers have collectively saved a whopping $2.75 billion through these state-run retirement programs, according to data from Georgetown University's Center for Retirement Initiatives. The vast majority, around $2.69 billion, is held in auto-IRAs.
"We're seeing those programs move the needle to cover workers… and it's also moving employers to adopt plans of their own," notes Angela Antonelli, executive director for the center. In other words, the programs not only help individual workers save but also encourage more businesses to offer retirement benefits. This creates a positive ripple effect.
The surge in state-run auto-IRA programs coincides with ongoing efforts to expand access to work-based retirement savings. Research from AARP shows workers are a staggering 15 times more likely to save for retirement if they can do so through their employer.
Automatic enrollment is a powerful tool. Vanguard's "How America Saves 2025" report reveals that in 2024, 61% of 401(k) plans included auto-enrollment, a significant increase from 54% in 2020 and just 27% in 2010. And this is the part most people miss... Auto-enrollment dramatically increases participation rates. Plans with auto-enrollment boasted a 94% participation rate, compared to just 64% for those without it.
Even the federal government is getting in on the act. The Secure 2.0 Act, passed last year, mandates auto-enrollment in 401(k) plans for many employers (though some exceptions apply, such as very small businesses and plans established before December 2022).
Furthermore, federal policymakers are continually exploring ways to strengthen the U.S. retirement system. The Automatic IRA Act, currently in Congress, mirrors the state-run programs by requiring most employers to automatically enroll workers in a retirement account, whether it's an IRA, a 401(k) plan, or a similar option. Another proposal, the Retirement Savings for Americans Act, aims to establish portable retirement accounts for workers who lack a workplace plan.
John Lettieri, co-founder, president, and CEO of the Economic Innovation Group, emphasizes that "There's no one solution in the marketplace that has everybody covered." He believes state plans can coexist with a federal law, ensuring that "left-behind workers have a wider array of options and stronger access as they choose how to plan for retirement."
While the fate of these federal proposals remains uncertain, states are forging ahead, refining their existing programs and exploring new auto-IRA options. For example, the Florida state legislature is considering creating a task force to explore ways to expand retirement savings options for private-sector employees without workplace plans.
Georgetown University's Antonelli believes that the collaboration between the public and private sectors is promising and moving in the right direction to close the access gap. She adds, "If the federal government does end up adopting some sort of mandate, the state programs will continue to play a role."
While the majority of private-sector workers (72%, according to the Bureau of Labor Statistics) have access to a retirement plan at work, the numbers are significantly lower for employees at smaller businesses. The BLS data, based on a survey of 126.9 million workers, reveals that only 59% of workers at employers with fewer than 100 employees are offered a retirement plan, compared to 90% of workers at employers with 500 or more employees. State-mandated programs help to address this disparity.
Interestingly, the existence of these programs seems to encourage employers to offer their own retirement plans rather than simply enrolling their workers in the state program, according to a December study from the Center for Retirement Research at Boston College.
However, it's important to note that a significant portion of workers opt out of these auto-IRAs. Antonelli notes that up to a third of workers choose not to participate. OregonSaves, the first program of its kind launched in 2017, has an opt-out rate of around 27%, according to recent data. Among those who do participate, the average savings rate is 6.8% of their pay, with an average monthly contribution of $176 and an average balance of $2,991.
Certified financial planner Douglas Boneparth, president and founder of Bone Fide Wealth, highlights that "The best-use case for these auto IRAs is just getting non-savers started." He adds that "The long-term impact depends [partly] on if they stay enrolled and increase their contribution rate over time."
For those who may be automatically enrolled in a state-run auto-IRA program, it's crucial to understand the differences between Roth IRAs and 401(k)s. Contributions to Roth accounts are not tax-deductible, unlike contributions to traditional 401(k) plans. Traditional IRAs, which may offer tax-deductible contributions, might be available as an alternative option, depending on the specific state program.
However, Roth IRAs offer a unique advantage: you can withdraw your contributions before age 59½ without penalty. This means that if you need to access your contributions before retirement, you generally won't face a penalty because you've already paid taxes on that money. However, earnings withdrawn before age 59 1/2 may be subject to taxes and penalties.
It's also important to remember that these Roth accounts generally don't come with an employer match, which is a common feature of 401(k) plans.
Finally, contribution limits for IRAs (both Roth and traditional) are lower than those for 401(k)s. In 2026, you can contribute up to $7,500 to an IRA, although higher earners may face limitations. Individuals aged 50 or older can make an additional $1,100 "catch-up" contribution.
For 401(k)s, the 2026 contribution limit is $24,500, with a catch-up limit of $8,000. Workers aged 60 to 63 can save an extra $11,250, thanks to changes enacted through Secure 2.0.
Now, it's your turn to weigh in: Do you think state-mandated retirement programs are a good idea? Should the federal government step in with a national solution? Or should individuals be solely responsible for their own retirement savings? Share your thoughts in the comments below!
