The Retirement Industry Could Do Some Simple Things To Help You Save More

The U.S. is facing a potential retirement crisis. Recent estimates from the Boston College Center for Retirement Research find that about half of today’s working-age Americans won’t be able to maintain their standard of living in retirement. How can we help Americans save enough so they don’t face significant shortfalls during their golden years?

Consider Save More Tomorrow, a program pioneered by behavioral economists Richard Thaler and Shlomo Benartzi . By leveraging behavioral insights, the program makes it easy for workers to save more for retirement. For instance, workers are asked to commit now to saving more in the future, which minimizes the impact of what’s known as “present bias.”

According to the findings, it’s possible to increase the most commonly used suggested savings rate of 3% to 10% without triggering a decrease in the number of plan enrollees. Most importantly, these higher suggested rates can help improve financial outcomes, boosting retirement income by nearly 10%. In “Save by Design,” a paper co-authored by Saurabh Bhargava and Lynn Conell-Price at Carnegie Mellon University, and Benartzi, we looked at the savings decisions of more than 8,500 employees across 500 workplace retirement plans, tracking the impact of design enhancements made to the enrollment website.

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