The Next Generation

Many years ago, I took a class in the Bronx to get my motorcycle license. The lessons took place in a random, shabby parking lot with bottom of the line loaner bikes that didn’t even have sideview mirrors. Most of the other students, like me, had cheap, low tech gear, barely meeting the requirements. One guy, though, had the full kit. His jacket, pants, gloves, boots, and helmet must have cost thousands of dollars. He looked impressive. But he was also the worst student in class. He actually flunked out, because he couldn’t make simple turns without falling over. 

I’ve witnessed new government programs suffer the same fate, trying to incorporate all of the bells and whistles from the start and then failing to meet the most basic requirements upon launch. Setting the basic requirements often starts in the legislative process. It’s important to figure out early on what is a must have and what can be built later, both for those sponsoring the effort and from potential users, especially those most impacted. Once that’s determined, as any good project manager knows, it’s crucial to have processes to manage scope, to be able to adapt in a thoughtful, structured way if things change and to avoid scope creep. 

The initial requirements will be different program to program. Here are some of the ways we divided initial requirements and future improvements during the start of the OregonSaves retirement savings program. At the time, auto-IRAs were an untested idea. We had to build almost everything from scratch, so we had to focus on just the basics, to make sure we got off the ground and determine if our initial assumptions panned out.

Initial requirements:

• Automatic enrollment through work

• Contributions through payroll deductions 

• Basic options for investment (e.g. capital preservation, target date, and index)

• Mobile-friendly website

• Customer service in English and Spanish, with translation services for other languages

• Statewide program

• Roth IRAs

• Manual entry and file sharing for payroll deductions

Potential future improvements:

• Individual enrollment outside of work

• Contributions from a saver’s bank account

• Wider variety of options (e.g. sidecar savings accounts, ESG investment options, etc.)

• Phone app

• Customer service representatives in more languages than English and Spanish

• Multi-state program

• Roth and Traditional IRAs

• Rollovers in

• Automated API connection to payroll providers

Subsequent programs have had the advantage of learning from Oregon’s experiences and advances in program models and technology solutions, but for each program at its inception, the primary goal to simply get it off the ground remains the same.

What comes next?

As programs mature, there is the opportunity to add more bells and whistles. It’s important to recognize, however, that the existence and success of a program can change the basic ground conditions in which it operates. More people with retirement savings and experience with saving could lead to more people seeking out different private sector financial services. This in turn could spur additional business and innovation in the private sector, which early research suggests may be occurring. In turn, that means that auto-IRA programs will need to continue to innovate and develop new strategies for building upon their initial success. 

In the college savings world, we’ve seen programs differentiate themselves in a number of different ways. Some have focused on diversity of investment choices. Others have focused on lowering fees as much as possible. Many incentivize program participation through promotions and tax deductions and credits. Did you know, for example, that in Oregon you can contribute to your college savings account through the Bottle Drop program?

Like college savings programs, auto-IRA programs will need to look for new, innovative ways to retain and attract new customers, even as basic functionality–what had been the main concern early on–continues to improve. 

The initial auto-IRA programs are likely reaching that stage of maturity now. It’s probably time to start investing in that fancy motorcycle kit, now that we’re far past the initial road test and are speeding along down the interstate.

This piece was featured in the May 5, 2022, edition of Retirement Security Matters. For more fresh thinking on retirement savings innovation, check out the newsletter here.