State program defaults employees without 401(k) plans into IRAs with 3%-7% contributions, affecting Social Security taxation.
Washington Saves launches July 1, 2027, automatically enrolling workers without employer-sponsored retirement plans into IRAs. The program sets default contribution rates between 3% and 7% of paychecks, targeting an estimated 1.2 million residents currently lacking retirement savings.
Participants can opt for Roth IRAs, which shield withdrawals from Social Security benefit taxation calculations. Traditional IRA contributions may reduce taxable income but could later impact Social Security taxation thresholds. The initiative follows similar state-run programs in Oregon and California, aiming to address retirement savings gaps among low- and middle-income workers.
For late-career workers like a 59-year-old in Tacoma, the program offers a first opportunity to build retirement savings. Delaying Social Security claims while using IRA funds could increase annual benefits by approximately 8% per year.