State task force seeks UO professors' expertise on saving

John Chalmers
John Chalmers

Two UO faculty members recently testified before a state task force looking at ways to address a potentially serious savings shortfall among residents nearing retirement age.

Finance professor John Chalmers and economics professor Bill Harbaugh appeared before the Joint Interim Task Force on Oregon Retirement Savings at the state capitol July 15. They shared their research with a presentation “Promoting Retirement Savings: What Works and Why.”

Nearly half of all working Oregonians have no access to an employer-sponsored retirement savings plan. And 26 percent of residents between ages 45 and 64 have accumulated savings of less than $25,000, according to a survey by Oregon AARP.

Left unchecked, experts say this savings shortfall will place a big burden on families — and the state’s economy — as this age group retires in the next two decades.

Among their recommendations, Chalmers and Harbaugh pointed to employer-sponsored, target-date funds and pretax payroll deductions that are opt-out, rather than opt-in.

Bill HarbaughOutside companies would manage the funds and employees’ contributions would never mingle with the state’s pension funds or any other state money. The funds themselves would be low-fee and include a mix of assets that would become more conservative as the employee’s retirement date approaches. Employees could choose to stop participating by opting out at any time.

“If the state can help people of modest means to get started earlier in their careers to save for retirement, they can reap huge benefits,” said Chalmers. “The sooner you start saving and investing, the quicker you start compounding.”

For Chalmers, these types of employer-sponsored funds would give employees of all income levels access to the types of savings vehicles from which others already benefit.

“If you’re a wealthy individual, you have plenty of folks that are coming to give you financial advice on how to invest your money,” said Chalmers. “But if you’re a low-income or middle-income person and you are encouraged to start saving money early in your career, that’s going to make a huge difference in your retirement outcome.”

The task force, headed by state treasurer Ted Wheeler, will present its findings to the Oregon Legislature in September.

Download Chalmers’ and Harbaugh’s presentation, watch a video of the task force's July 15 meeting and find out more about the task force’s work in The Bulletin and The New York Times.