Wyoming Retirement Education on Point

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Wyoming government has brought some 535 employees of the state’s executive, legislative and judicial branches into its retirement savings plan since July 2015 under a new policy of automatically enrolling each new hire.

They are free to withdraw from the plan at any time, but only 15 of the 535 have done so – “and not a complaint from anybody,” said Polly Scott, who manages the savings plan and heads employee retirement education.

This technique, borrowed from behavioral economics, addresses the inertia that prevents many people from ever signing up to save in their employer’s plan.  So why wait for them to join? Instead, Wyoming uses inertia to benefit state workers: when people are automatically enrolled, research shows, they tend to stay put and save.

This is one piece of a larger effort to educate government workers about what’s required to properly prepare for retirement – and nudge them to do it.  The 457 retirement savings plan is crucial. Wyoming’s retired state workers receive Social Security, but the inflation adjustment in their traditional defined benefit pension has virtually been eliminated for the near future.  The 457 plan “is voluntary, but it’s not optional if you want a secure retirement,” Scott said.

The heart of the state’s education efforts is a website titled “Your Whole Story” that is on point and explains in clear language likely to benefit employees. Employees are encouraged to increase how much they’re already saving, resist the temptation to withdraw their savings prematurely, and prepare themselves for a long time in retirement in an era of increasing life expectancy.

This initiative is based on a campaign sponsored by the National Association of Government Defined Contribution Administrators (NAGDA) – Scott was NAGDA’s president last year – and designed by the National Association of Retirement Plan Participants.  Other states use some version of “Your Whole Story,” including the Missouri State Employees’ Retirement System and Montana Public Employee Retirement Administration.

One problem Wyoming is tackling is young adults who hurt their retirement prospects by withdrawing money from their 457 plans when they leave their state jobs, which “means they’re spending it,” Scott said. Another issue is that more older workers are rolling 457 savings over to private IRAs, which can have higher fees.

The message is clear for employees who click on “Going Somewhere?” Those retiring are advised to leave their money with the state, while those leaving state employment can roll it over to their new employer’s savings plan. “But whatever you do, don’t jeopardize your financial future by taking your money out of your plan and spending it,” the website warns.

To counteract retirement angst, Wyoming kept things simple.  Compound interest is explained under the heading, “Let’s Do the Math.”  But there isn’t much math. Instead, a small dot represents a $1 investment, and a large dot, representing $6, shows how much a $1 dot will grow, if invested.  Feel free to ignore the footnote explaining this assumes 6 percent investment income annually over 30 years.

Wyoming adopted automatic enrollment so workers would start saving early in life – this can make a difference worth hundreds of thousands of dollars over a lifetime of working, the website explains.

Retirement “is a significant phase of your life,” Scott said, “and you need to save as soon as possible.”

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