Retirement inequality: Who's got access to 401ks and who doesn't?

Americans who want to retire may face very unequal paths to get there depending on where they live.

Workplace retirement plans, such as 401(k) accounts, have become a critical retirement savings tool for most Americans. Yet about 40 percent of full-time private sector workers in the U.S. lack access to an employer-based retirement saving plan. And access varies drastically across the country and even within a state, according to a study released Tuesday by the Pew Charitable Trusts.

Metropolitan areas with low access rates are heavily concentrated in Florida, Texas, and California, and those metropolitan areas with relatively low rates of access tor retirement plans generally have more people working for small employers, the study, “A Look at Access to Employer-Based Retirement Plans in the Nation’s Metropolitan Areas: Who’s in, Who’s Out,” found.

The disparity is stark: workers in Grand Rapids, Michigan had the highest rate of access in the U.S. at 71 percent, but only 23 percent of workers in McAllen, Texas did, making it the lowest in the country. Nationwide, 58 percent have access to a plan.

It's an issue of growing importance on a local level as governments consider how they can help out. Not doing so could mean facing a population unable to take care of itself in the future, which could put undue strain on programs like Medicaid, food assistance programs and other support services.

"We need to have some sort of mechanism to encourage people to start saving," said John Scott, director of the retirement savings program at Pew. "Policy nudges can make a difference."

The U.S. government has put several policies in place recently to try to get Americans to save more. They include the Pension Protection Act of 2006, which enabled automatic contributions to a 401(k) plan, instead of contributions that an employee had to opt into. President Barack Obama also recently created something called myRA, which allows some people who don't have access to a retirement plan to save.

In January, The Associated Press reported that Labor Secretary Thomas Perez says the administration will seek to make it easier for multiple employers to join together to offer retirement plans. For small employers. That would mean lower administrative expenses.

"We are willing to take steps to make it easier and cheaper for employers to offer a path to dignified retirement," Perez said. "They should be willing to do the right thing and set up more plans so their workers can save."

Perez said that employers with a common bond, say auto dealers, can now pool together to offer a retirement plan. He said the president will recommend doing away with the "common bond" requirement and let people from all kinds of businesses join together. The White House says it's recommending that Congress pass legislation that would ensure the long-term sustainability of such arrangements.

Lawmakers in several states are considering retirement savings plans for those who don't have access. Illinois, for one, created a state-run retirement savings program for certain employees without workplace access; it will start enrolling workers in 2017. Washington State last year created a marketplace in which small employers and the self-employed can shop for retirement plans.

In New York, Mayor Bill de Blasio recently endorsed the idea of a retirement savings plan for private-sector workers.

Pew's analysis of 104 metropolitan areas found that regions with the highest rates of access are in the Northeast, the Upper Midwest and the Pacific Northwest. Many of the areas with the lowest access rates are found in states in the South and parts of the West.

Areas with a high percentage of low-income workers, small business employers and Hispanic populations were most adversely impacted. Each of these groups tend to have lower access and lower participation rates in retirement plans.

The lack of access also underscores and overall sense of retirement insecurity in the U.S. Only 21 percent of American workers are very confident they will have enough money for a comfortable retirement, according to a 2016 survey by the Employee Benefit Research Institute; 42 percent are somewhat confident and 19 percent are not at all confident.

Overwhelmingly, the survey found that those with the most confidence are those with a retirement plan.