Participation and Pre-Retirement Withdrawals in Oregon’s Auto-IRA

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About half of private sector workers in the United States do not participate in an employer-sponsored retirement plan at their current job.  To fill the gap, a number of state governments around the country have recently launched initiatives to automatically enroll their uncovered workers in Individual Retirement Accounts (IRAs).  This paper reports on the experience of Oregon, which was the first state to launch an auto-IRA program (OregonSaves).  Because the program only began in July of 2017 and is in its infancy, analysts are still debating basic statistics about its operation, such as the participation rate.  To advance the conversation, this study uses administrative data from OregonSaves to develop a conceptual framework for measuring participation.  It then shifts the focus to pre-retirement withdrawals, tracking a cohort of employees, who had funded accounts in September 2018, over a 12-month period.

The results show that:

  • Participation in OregonSaves ranges from 48 to 67 percent; the exact rate is uncertain due to data limitations.
  • Twenty percent of employees with balances in September 2018 made at least one pre-retirement withdrawal during the subsequent year, removing $1,000 on average.
  • Withdrawals were more likely when employees left their OregonSaves employer relative to full-year contributors (32 and 17 percent of employees, respectively).

The policy implications of the findings are:

  • Most eligible employees participate in Oregon’s auto-IRA.
  • It is not yet clear whether participants will primarily use their accounts for retirement or precautionary savings.
  • It is still too early to draw conclusions about the program’s overall effect on household finances.