Two leading think tanks, the Heritage Foundation and the Retirement Security Project, have proposed payroll-funded IRAs as a way of meeting the retirement needs of the 71 million American workers who don't have the option of investing in a 401(k) plan. That's nearly half of the 153 million workers in America.
They also propose that workers be automatically enrolled and that contributions to the IRA be made via direct-deposit payroll installments to a low-cost, diversified IRA account. To encourage small companies to offer an "automatic IRA," the government would give them a tax incentive.
The proposal says: "Under our approach, those firms that aren't ready to sponsor a plan would be called upon at least to let their employees save in an IRA using the same powerful payroll deposit mechanism that drives 401(k)s."
AARP has supported the idea, and it has attracted the attention of a number of Congressmen.