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The Impact – Retirement Readiness and Higher Ed Enrollment

Mike McClanahan profile by Mike McClanahan

April is Financial Literacy Month and this episode starts with a discussion about retirement planning. How much will you need when the time comes? How do inflation and housing costs factor in?

“It really can be overwhelming,” said Seth Miller, Retirement Readiness Director, DRS.

“Generally retirement, the retirement industry, would indicate 80% of your current income is something to target and shoot for, but for folks all across the income spectrum, they have to do the math themselves and figure out where they are and where they want to be,” said Miller. “It’s a very personal question that I think a lot of people stress out about oftentimes, but there’s no one answer for one person. Personal finance is a personal issue.”

Miller helps state pension enrollees think through their retirement options. The state Department of Retirement Systems pays out several billion dollars in retirement benefits every year. The pension plans cover several hundred thousand state employees, local government workers, fire fighters, police officers, and teachers.

“Washington had some of the best funded pensions going into the pandemic and out of the pandemic as well and being in a strong financial position before a major shock is always a great place to be. Washington state also has a really long history of making pension decisions for the long term. There were changes made to the pension system in the seventies, the nineties, that made us really in a strong position going forward,” said Miller. “We also have a really wonderful State Investment Board that invests the funds that are in the pension systems and they have had historic success over the last decades, usually one of the best institutional investors in the country and in the world.”

“Pensions oftentimes get a lot of negative press. There are some pension funds in the country that are less well funded than Washington state . . . oftentimes you’ll hear some negative news about them, but in general pensions allow us to see retirement outcomes together,” said Miller. “I don’t want to get too technical, but adjusting for risk, longevity risk, if every person had to save money with the expectation that they were going to live to be a hundred, we’d all have to have a lot more money in our retirement accounts.”

“Pensions allow people to think about or to take some of that off the table because you’re going to continue to receive your pension for the rest of your life. That guarantee that the state of Washington makes allows people to breathe a little bit easier and have a little bit more room in their budget,” said Miller.

Washington is known for its home grown high-tech and engineering sector, but state leaders aren’t satisfied with the number of students who complete post-secondary educational programs.  Around a decade ago the state legislature set a statewide goal of having at least 70% of Washington K-12 students earn a post-secondary degree or apprenticeship credential by 2023. The state is not on track to hit that target and still lags behind the national average, according to the Washington Student Achievement Council.

“Well, we’re still probably about 15 points off, give or take. We’re trying to be very expansive what we count. This is not just about traditional college and bachelor’s degrees or even associates degrees and an apprenticeship. We count career technical ed programs and other certificates would count. One thing we know for sure is we are far enough away that we can’t just get there by a little bit of incremental improvement year after year,” said Michael Meotti, Executive Director, WSAC. “We need to do some things that are bold and different and get us closer to where we need to be.”

State lawmakers have significantly expanded programs meant to boost enrollment and college accessibility in the last few years.

 “Washington has boldly stepped up to probably being the most generous state financial aid environment in the country. You know, we always were pretty generous, but we had this phenomenon that if we, if the money ran out, you didn’t get anything. So there were 20,000 plus students a year who would be eligible, but get nothing. That was solved by the bill, you know, several years ago that’s been in place for two years. So we see now about 20,000 more students getting these grants who otherwise would not have gotten it, but for the passage of the bill . . . back in 2018,” said Meotti.

Meotti says the WSAC’s new enrollment strategy represents a shift from a uniform statewide incentive model to a regional grant based enrollment competition.   

“In Washington a full grant is full tuition and fees at any public university or college,” said Meotti. “We’re guaranteeing you college; let’s give it to you in tenth grade. We’re guaranteeing you free college at a public college.”

“We think the reason why a high school student – or an adult – because we embrace, if you’re 25 or 35 or 40, you know, there are pathways that can work for you. And we think it’s the environment that you live in, it’s what you experience as that 17 year old, whether you’re in Pasco or South King County or anywhere in the state, it’s what you’re experiencing in your high school, in your community, in your workplace, the messages you’re hearing, the signals you’re getting, from people around you about whether this is right for you, it can work for you, you can afford it – that’s what is going to make the difference,” said Meotti.

As for the new low-interest rate student loan program approved by the legislature this year, details are scarce at this point, according to Meotti.

“The primary purpose is to have an interest rate lower than the federal student loan interest rate, which right now is 3.2 or so percent annually, likely to go up in the next couple of years. So the goal is to have something low, perhaps as low as 1%, but the exact details are to be designed jointly between our agency, the State Treasurer and the State Investment Board,” said Meotti.

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