An IRA for the rest of us
CalPERS may oversee retirement funds for workers without pensions or 401(k)s
Israel Briceño has been too busy running his tamale shop to think about saving for retirement.
And no one at Briceño's bank has ever suggested he start putting money aside for when he's done working.
But now that a local legislator has introduced a bill to create a state-sponsored IRA, Briceño, 28, is interested in signing up along with his mother, Maria Morales, and one other full-time worker at the aptly named Mom's Tamales in Lincoln Heights.
"My family never was one to do investments of any type," Briceño said. "It's one of the things you don't think about until someone shows you the way, and you get involved."
Assemblyman Kevin de Leon (D-Los Angeles) says he's determined to make it easier for small-business owners and their employees to start putting money aside. His proposal, which has already received a first approval from an Assembly committee, would direct the California Public Employees Retirement System to offer individual retirement accounts to the one in three workers who can't get traditional pensions or 401(k) plans from employers.
"Millions of working Californians, the backbone of our economy, are putting in hours of work, day after day, but when they retire they have nothing to show for it," De Leon said.
The problem is particularly severe for lower-income and part-time workers, especially at businesses with fewer than 500 employees. Gardeners, restaurant cooks and construction workers rarely are targeted for sales pitches from the brokers, banks and investment houses that advertise on cable television, he said.
The CalPERS product, if approved, would make California the first state in the country to offer all workers a portable, easy-to-use retirement savings plan to supplement Social Security and other benefits, De Leon said. Pre-tax contributions could be automatically deducted from worker paychecks and forwarded to the state along with payroll taxes.
Employers, who would be free to supplement their workers' contributions, would participate in the state-backed savings plan at no cost. Employees would pay small management fees that should run far below those charged by banks and private investment firms. Annual returns would outpace earnings at many private funds, if the $245-billion CalPERS continues its recent string of stronger-than-average annual performances.
