Fewer Michigan workers ready for retirement
The number of Michigan workers ready for a financially secure retirement has dropped steadily since 2000, according to a study released Thursday by the National Institute on Retirement Security. The Great Lakes state once rated as high as 7 out of a score of 10 for retirement readiness in 2000, but now scores 4 on the institute’s rankings. The national average for all states is 5.4.
“Michigan was on the high end of worker participation levels in 2000,” said Diane Oakley, executive director of the institute. While the research didn’t identify a reason for the drop, “There’s been a lot of change in the economy, with shifts in employment away from manufacturing, that typical came with a pension.”
Michigan posted the biggest decline in the country between 2000 and 2012 in workers participating in a company retirement plan, putting the state 35th in the nation. The state also scored badly on medical costs for retirees, and the labor market climate for older workers. The overall score considers future income, key retiree costs and labor markets for older workers.
The state did a bit better on the question of future retiree income, scoring 6 out a possible 10. Of Michigan workers enrolled in a defined contribution plan, such as a 401(k), where workers save their own money plus a possible contribution from an employer, the average account balance was $30,021, compared with $30,345 for the national average. Financial planners say a good rule of thumb for retirement readiness is that workers in their 40s should have two or three times their salary set aside for retirement. In Michigan, the average balance means workers have saved only about half of the $61,137 average annual earnings rate during 2012, meaning they have, at best, just 25 percent of the savings recommended.
The scorecard also found:
■32.9 percent of older households in the state pay 30 percent or more of their income for housing, up from 25.5 percent in 2000;
■The unemployment rate for older workers in 2012 was 6.9 percent, up from 2.4 percent in 2000;
■The median hourly wage for older workers, adjusted in 2012 dollars, has dropped by 11 cents, from $14.73 in 2000 to $14.62 12 years later;
■Michigan retirees pay more than the national average for out-of-pocket Medicare costs, while per-patient payments from Medicaid were more than $2,000 lower than the national average.
In a conference call with reporters, Kathleen Kennedy Townsend, chairwoman of the Maryland State Task Force on Retirement Security and former Maryland lieutenant governor, noted that several states are moving toward creating retirement accounts for small businesses and workers who aren’t covered in large state, private or union plans. Michigan isn’t one of the states, however.
“What government has figured out is that if people don’t have a pension, those costs are going to bear on government,” Townsend said. “So government better figure out pretty quickly how to help businesses develop retirement security for their workers.”
The Obama administration is working to rewrite retirement security rules to allow states to make it easier to create retirement accounts for small businesses and workers who aren’t covered by a plan.
The institute research and scorecards can be found here.