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State treasurer warns of retirement savings crisis

State Treasurer Michael Frerichs speaks to the City Club of Chicago Tuesday. | Rich Hein/Sun-Times

Illinois State Treasurer Mike Frerichs painted an optimistic picture of the state on Tuesday at a packed City Club of Chicago luncheon, while also warning about a crisis affecting most Americans, the lack of retirement savings.

“Illinois is a great state with a bright future. Yes, we face challenges but we also have solutions,” the state’s top investment officer told the audience at Maggiano’s.And while Frerichs of course mentioned the state’s longstanding budget impasse, he vowed to continue to make changes to help the state’s finances grow.

“We have a retirement crisis in this country. We cannot ignore it, and we can’t wait until someone else offers a solution. The next step to address the retirement crisis that we all face is going to be a simple one,” Frerichs said.

He touted the state’s Secure Choice plan, which would require Illinois businesses with at least 25 employees to either offer a private market retirement savings plan or automatically enroll employees into the state-run Secure Choice program.

Frerichs cited data from the National Institute on Retirement that showed that among all American households the average retirement account balance is $3,000 for all working-age households, and $12,000 for near-retirement households.

“Make no mistake,” Frerichs warned, “this retirement crisis will touch every person in this room. It will grab every person in this room. You might be well on your way to what you deemed you and your family need, but the vast majority of people in our state and in our country are not. And we will pay the price if we do not step up to the plate.”

Implementation of the Secure Choice plan is underway and the program is estimated to be open for enrollment next year. Participants will be enrolled in a Roth IRA with a default three percent payroll deduction, but could choose to change their contribution level or fund option at any time, or opt out of the program altogether.

Frerichs, who took office last year, said he’s proud of the number of minority businesses working with the state — ones owned by women, veterans and the disabled — which he said has grown 1,000 percent.

“Those people were out there hungry for a chance to get into the game. But unfortunately some of these groups were never invited to play. So that’s what we did. We invited more diversity. We created an RFP [request for proposal] investment process which requires investment firms and financial institutions who seek to do business with our office [to] provide information on their commitment to diversity,” Frerichs said, adding it allowed his office to show others they are welcome to do business with the state as long as they perform.

The results? Frerichs said in 2014, the state’s $25 billion investment portfolio averaged about $50 million each month on minority-owned businesses, with that number now averaging $1.4 billion.