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In response to this situation, Illinois is developing a state-run retirement program that will make it easier and cheaper for workers to save. Many other states, including California, are studying this option.

Although there are differences in proposals, the common goal is to create a publicly managed system that will automatically include workers whose employers do not enroll them in a plan.

Workers would have a modest amount (around 2% to 3%) deducted from each paycheck, although they could opt out if they chose. The money would then accumulate like a 401(k) during a person's working years, with the option to receive a lump sum or draw a monthly payment at retirement.

There are four main advantages to this idea.

Almost half the workforce does not have the option to enroll in a 401(k)-type plan at their workplace. By creating a state-run system, many would have access to such an account for the first time.

One problem with employer-managed retirement accounts is that when people change jobs, they often cash out their holdings, paying penalties and losing their savings. But a publicly run system would be portable, so that people could keep contributing to the same system from one job to the next.

Another benefit to the state system is that participation would be the default option. There is now a considerable body of research showing that workers will contribute to their retirement if they're automatically enrolled, but won't contribute otherwise. (The basic story is that inertia is powerful. Many people may want to take part in a retirement plan, but they have busy lives and never get around to doing the paperwork if it requires action.)

The last advantage is that a publicly run plan would have far lower costs than many privately run alternatives. The administrative fees for a plan in a large state such as California would almost certainly be under 0.5% of the annual holdings. By contrast, private plans can easily charge 1.5% or more. The difference for someone putting $2,000 a year into an account for 30 years would be more than $25,000.

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