TITLE

Down the Road More Easily Traveled

PUB. DATE
July 2002
SOURCE
Journal of Financial Planning;Jul2002, Vol. 15 Issue 7, p27
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
This article discusses concerns over whether 401(k) and similar plans are enough for building adequate retirement savings. Part of the problem is the increasing automatic enrollment of participants unless they opt out. Automatic enrollment bumps up participation, but the default contribution rates are low and the investment choices are conservative, in part due to employers' liability concerns. Participants, including those in plans requiring voluntary signup, tend to leave their contribution rates unchanged, and thus are less apt to build a sufficient nest egg. Workers with smaller plan accounts also are more apt to cash them out. Company-sponsored education is not terribly effective, either. While education boosts participation and diversification, fewer than one-third of the participants make the changes they say they intend to. Inertia wins out. Employers need to be more aggressive, conclude the researchers, and government needs to reduce liability for plans choosing defaults that are more aggressive.
ACCESSION #
6990027

 

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