A shrinking but persistent share of America's workforce lacks access to employer-provided retirement plans, research shows. Now, a bipartisan bill introduced in Congress earlier this month looks to close that access gap.
The Retirement Savings for Americans Act (RSAA), introduced by Republican Rep. Lloyd Smucker of Pennsylvania, would create a new program called the American Worker Retirement Plan. The tax-advantaged retirement savings accounts, similar to the federal government's Thrift Savings Plan, would be for workers who currently lack access to workplace retirement accounts.
If enacted, the RSAA would enable the federal government to match contributions of up to 5% for low- and middle-income workers — comprising a 1% non-elective contribution and a 4% safe harbor match — with the match gradually phasing out at the median income level.
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This marks the third time that the RSAA has been introduced to Congress. Democratic Sen. John Hickenlooper of Colorado first introduced the bill in 2022, and did so again in 2023 along with Republican Sen. Thom Tillis of North Carolina.
A gap in access
Roughly 69 million workers, 55.5% of the U.S. workforce, lacked access to employer-provided retirement plans in 2021, according to an analysis of Bureau of Labor Statistics data conducted by the Economic Innovation Group, a bipartisan public policy organization.
Secure 2.0 helped expand access to 401(k)s for some part-time workers, but
Financial advisors say that 401(k)s and other employer-provided accounts are powerful tools for retirement planning. However, research shows that access to such accounts is disproportionately limited in rural and low-income populations.
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As a result, rural workers have nearly half the average retirement savings of urban workers, data shows.
Factors like income, the industry a person works in and the size of their company can go a long way toward shrinking the access gap between urban and rural workers, researchers found.
Income played one of the most influential roles in determining access to an employer-provided retirement plan. Holding all other factors constant, rural workers in the highest income decile actually have greater retirement plan access than their urban counterparts.
The industry in which a person works plays a similar role. The entertainment, accommodation and food services industries have the lowest rates of retirement plan access, while the finance, insurance and real estate industries have the best access. Among workers in these "best plan access" industries, the urban-rural divide shrinks from 13 percentage points down to just 2 percentage points.
Still, there's no doubt that "living in a rural area is generally associated with having restricted access to retirement savings plans for many different kinds of workers," the researchers wrote. The Economic Innovation Group has lobbied for the RSAA, arguing that while the "legislation would benefit workers everywhere, our findings suggest that the access and incentives provided by RSAA would disproportionately benefit rural workers."
But short of major policy changes, what can be done to improve retirement savings for workers who lack access to employer-provided plans? According to financial advisors, quite a lot.
Planning for later, now
Retirement planning without access to retirement accounts like 401(k)s is far from ideal, but financial advisors say it's still possible.
"Not having access to a 401(k) plan doesn't really mean you can't build a solid retirement plan," said Chuck Cavanaugh, head of financial planning for Citi U.S. Consumer Wealth Management. "It just means you have to get a little creative and proactive."
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For most workers, saving for retirement without a 401(k) means opening a traditional or Roth IRA. These accounts offer many of the same benefits as 401(k)s, but advisors say they also have one major drawback: contribution limits.
After a worker maxes out their annual IRA contributions, advisors point to a few other strategies they can use to help clients maximize their retirement savings.
"If someone owns a small business, they can open a SEP IRA or a SIMPLE IRA," said Margaret Doviak, founder of DM Wealth Management in Norman, Oklahoma. "If they have employees, a SIMPLE will likely create less funding liability with higher deferral limits than an IRA."
SIMPLE IRAs strike a middle ground in terms of retirement account contribution limits, allowing employees, sole proprietors and self-employed workers to contribute up to $16,500 a year.
Annuities and whole life insurance policies can also be useful retirement savings vehicles for clients who lack access to employer-provided accounts, but their use cases are not as broadly applicable as simple investment accounts like an IRA, advisors say.
"401k plans are just one of many ways to save and invest for retirement," said Nancy Listiawan, founder of Vera Wealth in Pasadena, California. "What matters most isn't the specific investment vehicle, but rather your consistent saving habits and discipline over time."
