Auto-enrolling people in retirement plans can help them begin to save. But people who can’t afford to do so tend to opt out.  

A new study evaluates the impact of OregonSaves, a retirement savings option for Oregonians who don’t have an employer-sponsored plan. The study, forthcoming in American Economic Association Papers and Proceedings, was co-led by John Chalmers, UO’s Abbott Keller Professor of Finance, alongside Olivia Mitchell at The Wharton School of the University of Pennsylvania, Jonathan Reuter at Boston College, and Mingli Zhong at the Urban Institute. 

Many people without retirement plans through their employer can set up an account on their own, but the evidence suggests most don’t. One of the goals of Oregon Saves, launched in 2017, was to make retirement savings more straightforward and increase participation.

The program requires employers to automatically enroll their employees, depositing 5 percent of each paycheck into a Roth IRA. Employees can opt out or adjust their contribution.

Between August 2018 through April 2020, almost 70,000 OregonSaves participants put away more than $51 million, or $754 per account on average, Chalmers and his colleagues found. At the end of April 2020, 34 percent of eligible people had positive balances in their accounts.

However, many people opted out of the program. The most commonly given reason: They can’t afford to save.  Employees enrolled in OregonSaves tend to work in low- to moderate-income industries with high turnover, such as home health care and food service. So it’s likely those workers are making a rational choice to reserve wages for rent, bills and food, the researchers said.

A review of the study is available online.