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Many of us can admit to the fact that being disciplined and following a planned course of action is not easy to start doing, much less maintain for years on end! One discipline that is unfortunately woefully undertaught in our schools is that of financial literacy and financial discipline. Yet, it is undeniable that choosing to be financially disciplined, or not, can mean your success, or failure, in life! Let’s suppose that a new program were created to help those of us who would want to be financially disciplined toward building retirement savings and saving money for emergencies and that the program is not dependent on employer contributions or taxpayer money to sustain it. Wouldn’t that be something we can all support?
State Treasurer Colleen Davis is proposing the establishment of the Delaware Expanding Access for Retirement and Necessary Savings program or EARNS. The Delaware EARNS Program (which is House Bill 205) will help build the safety net that many of us don’t have. The need is clear for Delawareans. Too many were never given the basic financial literacy skills to understand the importance of savings for necessary purchases or emergencies and for retirement. With the EARNS program, any person who works for an employer that does not offer a retirement savings program, such as a 401(k) plan, will have the opportunity to open up their own plan, which will stay with them, even if they change jobs. It’s theirs!
What are some of the facts? Twenty-one percent of elderly households in Delaware rely on Social Security benefits for at least 90% of their income! If you ask those same individuals if they could go back 30 or 40 years and be given the opportunity to be part of a plan that would give them more financial security in their later years, I bet many would jump at the chance to sign up. Why should we allow the number of underprepared individuals to grow and face this same fate?
When employers can’t or don’t offer retirement savings programs, shouldn’t the employee be allowed to have other options? Right now, those options don’t readily exist in Delaware. There are five states that have enacted the “Secure Choice” model. You can learn more details about the Delaware EARNS program by going to the state treasurer’s website.
OK, so let’s talk about costs for the program. Initially, the state will have to fund startup costs that are likely to be between $250,000 and $450,000 per year for three years. The estimated startup costs are based upon the experience of other states with similar programs. After the first three years, the EARNS program will be self-supported by its own program fees. This is a small cost for the long-term good that generations of Delawareans will earn from this program being put in place now. Furthermore, research shows that Delaware could save up to $18.2 million in social service program benefits between now and 2032 that would not be paid out because of the EARNS program.
The Delaware EARNS Program offers the opportunity for those who are not able to have access to an employer-provided retirement savings program or individuals needing help in setting aside funds for a “rainy day,” all without the need for placing any additional costs on employers. How can you not support a program that can help someone? Please reach out to your state representative and state senator to let them know you support HB 205, the Delaware EARNS program, and that they should, too!
Ronald Baron is president and CEO of Del-One Federal Credit Union.