AARP/Retirement Research Center Study: “The Effect of a Universal Automatic IRA with Emergency Savings on Household Wealth”Background: The RRC and AARP will soon release a study examining the possible effects of universal Auto IRA programs with emergency savings. According to a 2022 AARP report, approximately 57 million Americans, or almost half of private sector employees ages 18 to 64, do not have access to retirement savings plans through their workplace. Further, this coverage is inequitable, with a larger portion of Hispanic and Black workers lacking coverage. Given the high number of Americans who are excluded from the workplace retirement system and the negative impact this can have on financial security, studying how universal Auto IRA programs could improve financial security is a timely and important topic.This study employed an economic model using both household financial data provided through a NORC survey and existing public data to estimate such a program’s lifetime impact on household wealth and liquid assets for typical U.S. households. The model showed how varying assumptions and economic conditions would affect outcomes for both the overall population and by race, gender, and income. The modeling assumed those without access to an employer-sponsored retirement plan are defaulted into a payroll deduction Roth IRA, contributing 5.3% of pay.Findings: The study found that introducing a universal Auto IRA program with emergency savings would significantly increase the wealth of households among all employees without existing access to a workplace retirement plan. Having and using emergency savings helps to stabilize household finances over time, creating more consistent growth. Together with the Auto IRA, the study estimated that the median net worth for workers at retirement would increase by 69%, assuming contributions remained continuous. Even under a worst-case scenario with low lifetime contributions and low returns on investments, the median enrolled household would still see a 9% increase in net worth. Improved wealth was seen for all households, although the benefit to lower-income households was relatively smaller. Note, annual withdrawals for use in emergencies are factored into the analysis and reflected in the wealth accumulation.Bottom line: The lack of access to workplace retirement savings affects 57 million Americans. A universal Auto IRA program has the potential to improve financial security for those currently excluded from the system. Future RRC Research Minutes will delve into the study's additional findings, including the effects on lower income and Black and Hispanic households as well as possible changes in liquid assets.(Note: 5.3% contribution rate, capped at $6,000. 5.3% inflation-adjusted average annual return. $660 annual withdrawal rates. 63% average participation rate. All dollars are pre tax and inflation-adjusted. Liquid funds equal to any balance sheet assets plus Roth contributions that are available for withdrawal.)RRC members are welcome to reach out about being a future guest contributor to the Research Minute - contact rrc@dciia.org.