CalSavers Retirement Savings Program: What You Need to Know

Retirement savings are an essential part of financial planning, and the CalSavers Retirement Savings Program is here to make it easier for California workers to save for their post-work life. The program was created in 2016 by the California State Legislature to help employees of small businesses access a retirement savings plan. Now, it’s understandable if you need more information on this. To help you out, here is everything you need to know about the CalSavers program.

What Is CalSavers?

CalSavers is a state-run retirement savings program for private-sector workers who do not have access to a workplace retirement plan, such as a 401(k) or a pension. The program is voluntary and allows employees to contribute a portion of their paycheck to a retirement account. The contributions are deducted automatically from the employee’s paycheck and are invested in a professionally managed investment portfolio.

How Does CalSavers Work?

Employers are required to enroll in the CalSavers program if they have five or more employees and do not offer a qualified retirement plan. Once enrolled, the employer must provide the CalSavers program with employee information, including name, address, and Social Security Number. The employee is then automatically enrolled in the program and can choose to opt-out if they wish.

Employees can contribute up to $6,000 per year to their CalSavers account, and the contributions are made on a post-tax basis. The money is invested in a diversified investment portfolio managed by a professional investment manager. The employee can choose from several investment options, including a target-date fund, a conservative fund, a moderate fund, and a growth fund.

What Are the Benefits of CalSavers?

CalSavers offers several benefits to both employees and employers. For employees, the program provides an easy and convenient way to save for retirement. The automatic enrollment and contribution features make it easy for employees to start saving without having to take any additional steps. The program also offers a range of investment options, which allows employees to choose the best investment strategy for their retirement goals.

For employers, the program offers a low-cost retirement savings plan that is easy to administer. Employers are not required to make any contributions to the plan, and the administrative fees are low. The program also helps employers attract and retain employees by providing a valuable benefit that is becoming increasingly important to workers.

Is CalSavers Mandatory?

CalSavers is mandatory for eligible employers in California. Employers with five or more employees who do not offer a qualified retirement plan are required to enroll in the program. However, employees can choose to opt-out of the program if they wish.

What Are the Fees Associated with CalSavers?

The fees associated with CalSavers are low compared to other retirement savings plans. The program charges a small administrative fee, which is deducted from the employee’s account balance. The investment fees are also low, thanks to the program’s use of low-cost index funds.

What Happens to the CalSavers Account If the Employee Changes Jobs?

If an employee changes jobs, they can keep their CalSavers account or roll it over into another retirement savings account. The program also offers a retirement income option, which allows employees to convert their account balance into a lifetime stream of income.

What Are the Contribution Limits for CalSavers?

Employees can contribute up to $6,000 per year to their CalSavers account. However, the contribution limit may be adjusted for inflation in the future.

Conclusion

All in all, the program is easy to use, low-cost, and offers a range of investment options. For employers, the program provides a simple and low-cost retirement savings plan that can help attract and retain employees. If you are an employer with five or more employees who do not offer a qualified retirement plan, enrolling in the CalSavers program is a good decision. For employees, participating in the program is a great way to start saving for retirement and securing your financial future.

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