When Big Brother Works
Today I woke up to headlines in the New York Times that New York Mayor Michael Bloomberg wants to ban using food stamps to buy soda. (This, after his original plan to tax soda sales went off the rails.) Particularly in an era of nearly 10 percent unemployment, this seems like too elitist to me.
But I actually liked the earlier plan. The idea of nudging people toward behaviors that are good for them sits well with me – more so now that I’m seeing a trail of evidence that it’s working in the retirement space. A new study released today from the Employee Benefits Research Institute finds that automatic features – like auto enrollment followed by auto escalation of contributions until you max out – in 401(k) plans increases the chances of being able to replace 80 percent of your pre-retirement income in retirement by 30 percentage points for both low and higher income workers. Under this system, nearly 80 percent of low income workers will be able to replace that much of their income, and nearly 65 percent of higher earning workers.
And while Mayor Bloomberg needs to go through an approval process to make this happen for the city, employers can pretty much just flip a switch and make it happen for their workers. If you’re one of them, call the company that administers your 401(k). Today.
