Colorado’s State Treasurer office estimates that more than 40% of the state’s private-sector workforce does not have access to a retirement savings plan at work. That equates to nearly 940,000 workers. A new program called Colorado SecureSavings (CSS) was created to meet this need, and its website for applicants went live in mid-January 2023.
CSS can help you save for retirement through voluntary automatic payroll contributions to your own Roth Individual Retirement Account (IRA). You decide how much to save, and you have options in how you want those savings invested for potential growth, very similar to the way long-standing employer plans like 401k’s function.
“With Colorado SecureSavings, businesses can help their employees save for retirement in a convenient Roth IRA that is portable even if they change or leave their job,” CSS states. “This new program is an easy way for Colorado employees to save for the future.”
Among the benefits the Treasurer office lists are the following:
- CSS requires very little time and administration.
- Individuals sign up through an easily navigated website.
- It’s portable — if you change jobs, your money and your account go with you.
- Contribution amounts are customizable, by you, to meet your needs.
- It’s voluntary and flexible — stay enrolled automatically or opt out and re-enroll later.
- You designate beneficiaries for the funds in the event you pass away.
- It includes support for part-time, self-employed, and seasonal workers.
- You have access to online tools and real people trained to answer your questions.
Eligibility and Key Details About Colorado SecureSavings
CSS is open to anyone 18 years of age or older who has earned taxable wages from a Colorado employer for at least 180 days. There is no upper age limit to participate.
An employer is required to facilitate the Colorado SecureSavings retirement savings program if:
- The business is registered to operate in the state of Colorado.
- They have at least five W-2 employees who have worked for them for at least 180 days.
- They have been in business for two or more years.
- And they don’t currently offer a qualified retirement savings program to employees.
You’re in control
Your CSS account belongs to you. Your money remains in your retirement savings account under your control. If you change jobs and if your new employer also facilitates the program, CSS will notify you and your payroll contributions to your account will begin at your new job, unless you opt out. (Remember you can opt out of CSS at any time.) If your new employer already offers a qualified, employer-sponsored retirement plan, that employer is not required to facilitate the CSS program. However, you can still proactively contribute directly to your CSS account on your own.
Similar to most any retirement account, CSS has an annual asset-based fee. It is approximately 0.32%. This means you will pay approximately $0.32 for every $100 in your account. There is also a $22 annual account fee. These fees pay for the administration of the program and the operating expenses charged by the underlying investment funds in which the program’s portfolios are invested.
As a side note, there are no direct costs paid by employers who enroll in CSS. Their only obligation is to “facilitate” the program, meaning they have systems in place to process your payroll deduction contributions into your CSS account. Also unlike many employer-sponsored retirement plans (e.g., 401ks), there is no employer match added to whatever you choose to contribute to your CSS account.
Security for your funds and personal information
CSS states it has processes in place to protect the security of contributions to your account. To quote: “Our program administrator and their affiliates have dedicated security and compliance teams to implement encryption, strict internal protocols and training, and annual independent security audits. And they implement industry-standard account authentication and password protection procedures.”
As with almost any retirement investment of this kind, your funds are not guaranteed any set rate of growth. They can even lose money. CSS lets you choose investments based on your age, the length of time to your retirement, and your risk tolerance, among other factors.
CSS is not like bank deposits with FDIC-insured principal. It is also different from a bank account in that the opportunity for growth is greater than what a bank savings account or CD might offer. All investing involves some risk, and there is no guarantee of earnings. The CSS program offers a range of investment types to help you choose options that balance different levels of risk. (More on this below.)
Withdrawing your CSS money
Can you take money out of your CSS account once it’s been deposited there? The answer is a qualified yes, because there are conditions. Remember your CSS account is a Roth IRA, subject to Roth IRA rules. There is no fee or penalty for withdrawing the contributions you make. However, investment earnings are subject to taxation and an additional penalty if taken out before you reach age 59½. There are penalties if you withdraw funds before you’ve had your first Roth IRA for five years. Once you meet both criteria, you pay no taxes or penalties on Roth IRA withdrawals. If you’re unsure about your withdrawal conditions, it’s best to consult with a tax expert or financial advisor. It goes without saying that withdrawing CSS funds prior to retiring defeats the purpose of the program, which is to help you finance your retirement.
Your full retirement financing plan
Enrolling in CSS does not mean this must be your sole retirement account. You can contribute to more than one savings plan or account at a time. Just keep in mind the IRS places limits on contributions to IRAs that are cumulative for all traditional and Roth IRAs owned by an individual, and your CSS funds would be part of that accumulation. CSS will actually monitor your account and notify your employer to stop contributions when you are nearing the limit—for that specific CSS account. But CSS will not have information on your contributions to any other IRAs you may have. You should ensure that the total of all your IRA-type accounts is within the IRS’s annual limits. It’s best to consult a tax expert or financial advisor to discuss your specific circumstances.
Two Ways to Participate in Colorado SecureSavings
Saving through your employer
If your employer participates in Colorado SecureSavings, you can choose to:
- Do nothing and let your participation start automatically. What happens is after 30 days you will be enrolled automatically to establish your “account,” using the default savings and investment options built into the program. The default savings rate is 5% of your gross pay. Your employer deducts that amount from your paycheck after taxes have been taken out and deposits it into your CSS Roth IRA. This default choice includes a 1% annual increase in savings for your account and takes effect automatically each January, so long as you have been enrolled for at least six months. (Your payroll deduction rate for savings maxes out at 8%.) You can elect not to have your savings rate increase in any given year. And remember, even though all this happens by default, you can opt out of the program completely if you choose and then re-enter it at a later time if you wish.
- Customize your account. With this approach, instead of letting things happen automatically, you can choose to customize your contribution amounts and select your investment options. Once enrolled, you’ll start saving your selected percentage of your paycheck routinely into your own retirement savings account, through payroll deduction. The 1% annual increase in deduction amount applies here as well, unless you choose to decline that.
Saving on your own
If your employer is not enrolled in CSS, or you are self-employed, you can contribute directly to your own Roth IRA account through the CSS program. You would do the following to get started:
- Create an account. You’ll just need your Social Security number, date of birth, and residential address.
- Customize your savings choices. Set up automatic contributions from your bank account (instead of from your paycheck) to your Colorado SecureSavings account and select your investment options.
Note that when processing through payroll deduction with your employer you can contribute to your CSS account only on a percent basis, not specific dollar amounts. If saving on your own, specific dollar amounts can be designated.
How do you know if your employer facilitates the CSS program? If you haven’t received your automatic notification and enrollment, you should ask your employer. Or call 1-844-711-5001, Monday – Friday, 8 a.m. – 5 p.m. MT.
Remember in all cases with CSS, your savings are going into a Roth IRA. You can change your savings rate at any time—from as little as 1% up to a maximum of 100%. BUT . . .because it is a Roth IRA, the total amount you save must be within the federal government’s limits for Roth IRAs. In 2023, the IRA contribution limits are $6,500 per year ($7,500 per year if you are age 50 or older), as long as you earn at least $6,500 / $7,500 in income. As noted earlier, these are cumulative maximums you can contribute for all your IRAs together.
The amount of money you can contribute to a Roth IRA also depends on how much you earn and your Modified Adjusted Gross Income (MAGI), which is essentially what you earn at your job, plus any other income from investments and other sources. Your contribution limit also depends on how you file your taxes. As an example, for tax year 2022, a single filer over age 50 must have a MAGI under $125,000 in order to contribute the full $7,500. A married couple filing jointly would have to have a MAGI under $198,000.
Investing for retirement involves strategizing ways your money can grow over time in order to meet your future needs and retirement goals. Like most retirement programs, CSS offers a variety of investment options, ranging from conservative to aggressive. How you choose to invest will depend on your timeline to retirement, your risk tolerance, and other factors. Before making any investment decisions, it is always prudent to seek competent financial advice. AgeWise Colorado offers a few options for such advice. Click Here.
Once again here, you can choose to do nothing and let CSS handle where your money goes. CSS says in this case your savings would be invested initially in a “capital preservation” fund and then after 30 days in a “target retirement date” fund. The latter is a commonly used type of fund that invests in a mix of stocks and bond funds based on your date of birth, which suggests how far away your retirement date is. In very general terms, this typically means a gradual shift to less aggressive investing as retirement draws nearer. Capital preservation funds are somewhat different. They are typically very conservative, intended to, as the name implies, protect your money, with any funds growth being comparatively more modest.
Alternately, you can manage your investing more actively, choosing not just capital preservation goals and target retirement date funds but also bonds and international equity funds.
The investment firms BlackRock and State Street Global Advisors have been selected as investment managers for Colorado SecureSavings. The Capital Preservation Option mentioned above is 100% invested in the State Street Institutional U.S. Government Money Market Fund. The Target Retirement Date Options are 100% invested in State Street Retirement Funds, which invest in an assortment of stock and bond funds managed by State Street. The Bond Index Option, intended to be a more conservative option that seeks to help investors preserve the value of their savings, is 100% invested in the State Street Aggregate Bond Index Fund. The International Equity Option invests in a portfolio of assets, designed for investors with a longer time horizon (10 years or more) because it will contain the highest level of risk and the potential for higher returns. This option is 100% invested in the BlackRock iShares MSCI Total International Index Fund
When You’re Ready to Create Your CSS Account
Once you’re enrolled in CSS (remember this will most often be done automatically by your employer) and you are ready to participate you can set up your account here and follow the on-screen instructions. If you need help, call at 1-844-711-5001, Monday – Friday, 8 a.m. – 5 p.m. MT.
More information and guidance is available in a well-designed and easily navigated website at https://coloradosecuresavings.com/.