When it comes to saving and preparing for retirement, there has been a continuing retirement savings crisis across the country. In response to this crisis, some states have introduced mandatory automatic enrollment plans for employers in these states to offer a state payroll deduction savings program, including California.
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What is CalSavers?
CalSavers is a state-run Roth IRA program for California-based, private-sector workers whose employers do not provide a retirement savings plan. It is also available for self-employed individuals and others who want to save extra toward retirement. This program, which began in 2019, offers millions of workers in California the opportunity to save and plan for their future.
CalSavers is mandatory for employers with 5 or more California-based employees and currently do not offer a qualifying retirement savings plan. However, participation is completely voluntary for employees and they can opt in and out of the program at any time.
Benefits
The main goal of the CalSavers program is to provide an easy way for workers to save for retirement. Employees who have access to an automatic enrollment retirement plan are more likely to save than those who don’t. The program is completely voluntary for employees so they can opt-out if they do not wish to participate.
How to Contribute to CalSavers
You can enroll in CalSavers independently or through your employer online. In order to contribute to CalSavers you must:
- Be at least 18 years of age
- Work for a CalSavers eligible employer (if you’re joining through your employer)
- Have a bank account, which will be used to make contributions.
- Able to provide CalSavers with personal information such as full name, birth date, social security number, and home address.
After enrolling in CalSavers, your employer will withhold your set contribution amount from your paycheck and submit them directly to the CalSavers program to be allocated to your account and investments. If you are independently participating, your contributions will be made directly from your bank account into your CalSavers account. The contribution rates will be based on your annual gross income.
Your contributions to your CalSavers IRA will be contributed as either a percentage if you enrolled through an employer or a flat dollar amount if you enrolled independently. Starting out your contributions will be 5% of your gross salary and increase 1% each year up to a maximum of 8%. Participants can choose to opt-out of the automatic increase feature or customize it to fit their needs.
While CalSavers is not mandatory for employees to enroll in, participating individuals will have the opportunity to save and plan for their future retirement. To learn more about retirement saving options, contact us today.
