Retirement Security: What’s Up in Wisconsin!

This week we catch up with Treasurer Sarah Godlewski, who’s been working closely with Governor Tony Evers and leading the Retirement Security Task Force established in Wisconsin’s 2019 budget bill. With a population of 5.8 million and a 3.1 million-person labor force, Wisconsin ranks in the top half of states. The state is fortunate to have its share of innovators and go-getters.

In 2017 the Center for Financial Security at the University of Wisconsin–Madison published a report on retirement security, The Case for Reducing Poverty Among Seniors: Encouraging Savings for Retirement by People in Wisconsin. In 2019, Wisconsin’s Legislative Reference Bureau followed up with its report, Retirement Security in Wisconsin. You can find both reports here (scroll). Both identified meaningful retirement security gaps and opportunities. Not ones to stand by in the face of challenge, Wisconsinites are taking action. Let’s get you a little closer to that action today.

Treasurer, retirement security is such a hot topic around the country – have you found anything that’s unusual about Wisconsin?

Yes, we’ve learned some important things. We’ve identified that Wisconsin's population is aging faster than the national average. Our aging population is just growing more quickly. By 2030, we’re projected to have a 60% increase in Wisconsinites who are 65 plus. If you think about that, if we do nothing -- and people can't live off of their social security alone – the expectation is that there'll be 400,000 elderly Wisconsinites living in poverty by 2030.

It’s not great for us, and it costs the taxpayers. For taxpayers that will be an increase of $3 billion. By 2030 our senior programs by 2030 will be at $4.7 billion to run at the state level - $4.7 billion. So we can’t afford to do nothing.

Now, what is the right thing to do? After a lifetime of hard work people should have the ability to retire and feel secure. And we can't afford for that not to be happening. Our state budget simply cannot afford to absorb billions of dollars in only about a decade. That's really what it is, which is insane.

Backing up for a moment – you’re newer in your role – how did this catch your eye

One of the things that went across my desk was the stat that 88% of Wisconsinites do not feel financially secure and wish they had saved more for retirement. This is a concern of Governor Tony Evers’ as well. As I was talking to the Governor we both said: we have to do something.

I was thinking about my own retirement story. Some people say: Sarah, you're a younger state treasurer. Why do you care about this stuff? You're a long way from retirement. I remember when I turned 30 and I was really worried because I had not saved a dime for retirement. I had not saved a dime. And I remember reaching out to my HR department saying, I need to sign up, I don't know what to do. I need to get on the right track. And they said to me, well, Sarah, we automatically enrolled you. So you've been saving for the last seven years.

That's incredible.

Yes. It is. Unbeknownst to me I was where I needed to be at that point in my life. But that's not the case for everybody. And it’s real that retirement is an issue that is often second or third in people's minds. Then when they actually retire, they're thinking, I wish I would have saved more. So how can we just incorporate this in the way that we live? Because auto-enroll is such an easy thing.

We couldn’t agree with you more – tell us about the Retirement Security Task Force you’re leading

We were elected in November of 2018 – following that the Governor wrote retirement security analysis into his budget and identified Treasury to lead it. So we kicked it off right away. We started in the spring of 2019 and held our first task force meeting in October.

One of the things that has become quite real and important for this Task Force is the whole issue of access. In the summer and fall, we started listening sessions across the state to understand what our small businesses are dealing with. And, what are families experiencing with retirement security.

I remember a session we did in Southeastern Wisconsin. A woman in her sixties joined in. She said, I'm not here for myself. I'm here for my children. She has three kids in their thirties and not one of them has access to a retirement account at work. One daughter is self-employed and has tried to work with different people to open a Roth and it’s been challenging.

Another daughter works for a small business that simply doesn't offer a plan. And the third is part of the gig economy and has said it is really hard to transition her account from place to place. This mother was worried. She herself was a part of a company that, starting in her twenties, accrued a pension for her. She was able to retire and feel secure, but she worries about her kids.

For us this was a wake-up call about how we really need to step up and do something now, before it's too late.

It’s an understatement to say a lot has happened in the world since you started your process …

Yes, that is an understatement. Now as a task force we are looking at lessons we're all learning from the current situation, both with COVID and systemic racism.

With COVID, we had a task force meeting scheduled for April and I was trying to understand ‘how do people feel about retirement security in today's current environment’, knowing that people are underemployed and unemployed -- where does this fit in the conversation. One thing that became clear is that people were using their retirement savings – these were their only savings period -- they were using their retirement account as an emergency savings account.

That insight led us to create a new universal savings committee. We want to understand how you might leverage the ability to save. We know if you could save for retirement sooner, say the day you are born, and if you could generate compound interest in those first 18 years of life -- that's a game changer.

This committee is looking for the tools out there that allow this. Today you either need earnings or a job in order to leverage most retirement tools. So how can we think through developing something that will allow people to save earlier and that follow them throughout their life. This is savings that can really make a difference. So that's the first piece.

We know you’re thinking about racial equality as well.

Yes. The other piece about starting earlier is the systemic racism piece. We know that an African American woman makes 54 cents to the dollar. We believe if she were able to save earlier or if everybody was started on the same foot, it would really begin to address the wealth gap. In addition to that wealth gap, the other aspect of systemic racism that we are looking at with retirement savings is access. The University of Wisconsin found that 46% of black Wisconsinites had access to retirement at work, compared to 66% of white Wisconsinites. What can we do to increase accessibility to everybody and particularly our communities of color, or even here in rural Wisconsin that do not have the access that even allows them to save.

Interesting – knowing it’s early, are you seeing good ideas in some of the spaces you’re studying?

Yes. We’ve narrowed our focus to three spaces. The first is Tax and Incentives. This group is looking at how can we potentially leverage Wisconsin's tax code to encourage savings and to be creative with supporting small businesses. What are the incentives that can help drive both.

We’re calling the second bucket of action Accessibility and Saving. And that's looking at what would Wisconsin's “Work and Save” model be. What are some lessons learned from other states, like Oregon and California and New Jersey? And what could be right for Wisconsin.

And then the third committee is the Universal Savings strategy, which is trying to address that circumstance for people who say, I just don't make enough money consistently to put away or, I wish I would've saved earlier. What is the tool that we could use to help people start saving for retirement the day they’re born?

We like the idea that everybody born in the state of Wisconsin would get an account that helps them to start saving for retirement.  We call it 401Kids. The idea would be that in the hospital as a new mom, you would get information that would say we are opening this account for you. If you don't want it, let us know. But if you do want it, we're going to put $100 or $200 in it. And then it would be held at a custodian and invested until the child is 19 and they can decide then whether they want to roll it over into a workplace 401(k), or into the state work and save program. This is the kind of vision that we are working toward.

That’s innovative. What else should we know about Wisconsin’s thinking around retirement security?

I would say the other unique thing when I look at our readiness is that we have worked hard to build a diverse and collaborative coalition. Ours is a bipartisan task force that includes the Governor, the State Treasurer, the Legislature, it also includes businesses, it has the financial industry involved. It includes critical community service entities -- so I think we've done a really good job at building a diverse group, all working towards the same solution. In today's environment, that's sometimes hard, especially in a place like Wisconsin. But the group is working on this collaboratively and with a lot of different ideas as they come to the table working toward common goals. To us, that is an additional readiness factor.

Let’s talk about next steps in Wisconsin

So, these committees are working toward recommendations that will be delivered to the Governor. We are now looking at the first of the year. As our legislative process kicks off in 2021, we’d like these recommendations to be included in that legislative process. One of the things that we've also done is that there is a lead legislator in each committee. Those lead legislators in a way “own” what these recommendations will be. So that way we make sure that they are included in a greater legislative package.

Our next committee meetings are set for July 20, and we’ll keep you posted when we schedule the next full Task Force meeting.

Retirement security is important – but not the only thing you’re working on. Tell us about some of your other efforts.

the other economic security initiative that we are working on is home ownership. We’re particularly looking at the foreclosure process because we know in Wisconsin, as people are unemployed and underemployed, it's just a challenge for them, whether it's to pay their property taxes or their mortgage. And so how can we be on the front end and be proactive? That's been an effort that has been a collaboration between the County Treasurers -- they manage property taxes in the state – and social services, and financial entities. In August we are piloting an early intervention foreclosure process that will specifically help people who have been impacted by COVID. We hope that then this process will continue beyond COVID and continue to help people stay in their homes.

Treasurer, we’re impressed with your level of organization and strategic approach. If folks want to stay connected to or be supportive of your efforts, what's the best way?

The best way right now would be to connect with us directly at treasurer@wisconsin.gov. And we’d love to hear from you!

Well, we really appreciate the time with you today. Good thoughts on your next steps. Interested in more? You can connect on social: @WITreasurer and @SarahforWI, and directly with the Treasurer and her team via email here. See the Wisconsin Retirement Security Resource page here.

This piece was featured in July 16, 2020 edition of Retirement Security Matters. For more fresh thinking on retirement savings innovation, check out the newsletter here.