saving 15%?

[disneysteve]

Ah...and who are these omniscient, perfect, corporate HR staffers who decide what the "correct" path is? Societies, in general, get the best outcome when people are free to make their own decisions.

Do you really have a problem with jobs auto-enrolling people to contribute 3% to their 401K? If so, we'll have to agree to disagree.

You're perfectly free to opt out.

[james.hendrickson]

Do you really have a problem with jobs auto-enrolling people to contribute 3% to their 401K? If so, we'll have to agree to disagree.

You're perfectly free to opt out.

The literature is very clear on the financial impacts - it improves retirement savings. Its also a form of soft paternalism.

[Like2Plan]

While we're on the subject of auto-enrollment...I think we need to be very careful about how we approach this topic. Yes, you can improve someones' savings rate if you auto-enroll them in a 401(k), but that's a policy which is consistent with treating employees like children or serfs. Do you really want to live in a country that lets corporations treat people like that? Instead shouldn't we be educating the general public about the benefits of saving? That's an approach that would probably get us to a higher savings rate without infantalizing the general public.

I'm not sure I like the automatic sign up, but then on the other hand---back in the days of pensions it was automatic and you did not have the option to opt out. Social security is automatic (and very few have the option to opt out). I never thought of it as "infantalizing".

[disneysteve]

The literature is very clear on the financial impacts - it improves retirement savings.

Exactly. I see that as a good thing.

[kork13]

The literature is very clear on the financial impacts - it improves retirement savings. Its also a form of soft paternalism.

I'm totally okay with an organization looking out for the best long term interests of its employees -- as an organizational leader, I see that as a part of my job. It's also in the best interest of the company -- people with stability in their work, social, financial, ...(etc.).... lives are better employees. Their stress is lower, they're more reliable, healthier, more productive & produce higher quality work, etc. All of this is backed up by mounds of research. Yes, it gets slightly into their financial business by assuming they want a secure retirement, and allocating a small fraction of their income on their behalf. But auto enrollment is a growing corporate standard across the country. So it's not one individual or board of people devoting what's "best" for employees... Rather, it's a broad swath of American companies, as a whole, recognizing its value.

At the very least, I think a company should automatically bring up an employee's contributions to earn the full match available, at least over time. It's not about thinking of people as incompetent, simply helping them get on the best path. As L2P said, pensions & SS (by and large) weren't ever optional either. It's a question of taking care of your people.

[james.hendrickson]

I'm totally okay with an organization looking out for the best long term interests of its employees -- as an organizational leader, I see that as a part of my job. It's also in the best interest of the company -- people with stability in their work, social, financial, ...(etc.).... lives are better employees. Their stress is lower, they're more reliable, healthier, more productive & produce higher quality work, etc. All of this is backed up by mounds of research. Yes, it gets slightly into their financial business by assuming they want a secure retirement, and allocating a small fraction of their income on their behalf. But auto enrollment is a growing corporate standard across the country. So it's not one individual or board of people devoting what's "best" for employees... Rather, it's a broad swath of American companies, as a whole, recognizing its value.

At the very least, I think a company should automatically bring up an employee's contributions to earn the full match available, at least over time. It's not about thinking of people as incompetent, simply helping them get on the best path. As L2P said, pensions & SS (by and large) weren't ever optional either. It's a question of taking care of your people.

Kork - I respect your viewpoint and I respectfully disagree.

Yes, people's financial situation improves by automatic enrolling someone for a 401(k) program, and this kind of policy has a number of problems.

1. Its hard to objectively determine what people's "best interests are". There is no objective standard for this, and the financial industry ha never offered one - the only rationale in the literature is "save more". What if contributing to a 401(k) isn't in someone's best interests? Maybe they'd be better served by paying off their credit cards? Or maybe they have family money and don't need a 401(k)?

2. "Nudging people" into 401(k) programs is a form of paternalism. Adults can, and should make their own decisions and take action on what they feel is best. Not what corporate executives or HR leaders feel is best for them. Having decisions made for you is appropriate for children, and slaves, but not for free intelligent adults.

3. Whats the practical difference between manipulating people's choices and eliminating them? Right?, so proponents of "nudging" basically say that wise decision-makers should tweak the options and information available so that the easiest choice is the right one - in this case, contributing to a 401(k) program. But, where is the practical difference between structuring someone's choices and taking them away? I'd challenge anyone on the board to explain the practical difference.

[disneysteve]

James, as we've already said a few times, even when there is auto-enrollment, participation is still optional. It's a simple matter to contact your HR department and opt out. You may even be given that option at the time you are hired before a penny has gone into the account.

If it's optional, where is the problem here?

And what's your opinion of pensions that have mandatory contributions? I would think that would be a much bigger thing to object to than voluntary 401k participation.

[kork13]

And what's your opinion of pensions that have mandatory contributions? I would think that would be a much bigger thing to object to than voluntary 401k participation.

That's the simplest difference between structuring someone's choices & taking it away entirely. Mandatory pension contributions remove all choice. Auto-enrollment still allows the individual full authority & choice to reject participation in the 401k.

[disneysteve]

Mandatory pension contributions remove all choice. Auto-enrollment still allows the individual full authority & choice to reject participation in the 401k.

Exactly. The 401k lets YOU decide how much, if any, you want to contribute. You can leave the decision to the company and they'll do 3% with a 1% annual increase, or you can freeze it at 3% or set it at any level higher or lower or none at all.

With a pension, you contribute the full amount that they require and that's it.

[TexasHusker]

I saved 15% on car insurance by switching to GEICO!

[james.hendrickson]

I saved 15% on car insurance by switching to GEICO!

So...I get it that Texas is making a joke here...but this is an example of effective marketing. GEICO has managed to associate their brand with saving money...its to the point that someone can post on an internet forum and everyone gets the joke.

[disneysteve]

I saved 15% on car insurance by switching to GEICO!

Last time I shopped rates, Progressive actually came in cheaper than Geico, so we went with Flo instead.

[TexasHusker]

Last time I shopped rates, Progressive actually came in cheaper than Geico, so we went with Flo instead.

Yes, but did you stay at a Holiday Inn Express last night?

[disneysteve]

Yes, but did you stay at a Holiday Inn Express last night?

I wish. That would imply I was on vacation. I miss vacations. We haven't been on one since February 2020.

[Petunia 100]

While we're on the subject of auto-enrollment...I think we need to be very careful about how we approach this topic. Yes, you can improve someones' savings rate if you auto-enroll them in a 401(k), but that's a policy which is consistent with treating employees like children or serfs. Do you really want to live in a country that lets corporations treat people like that? Instead shouldn't we be educating the general public about the benefits of saving? That's an approach that would probably get us to a higher savings rate without infantalizing the general public.

Haven't we been trying to do that for decades, and not making much headway?