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403bskeptic

Forcing Employees To Save By Law

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Your link doesn’t work: https://www.marketwatch.com/story/want-to-get-more-people-to-save-for-retirement-make-it-the-law-11615990210?reflink=mw_share_facebook&fbclid=IwAR3I74DkDG1Ju83z6y2FZp0OVevVXsIiM8ewD_5iw-0PbzuIWwo-ciOjD1I

I don’t think the proposed legislation applies to teachers. It’s for employees who have NO retirement plan. Teachers have a pension , which they are required to participate in. 403b and 457b plans are voluntary unless they are part of the required pension plan. As in a hybrid pension plan.

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Opt-out enrollment is supposed to yield higher participation than opt-in. Getting colleagues started is often the most difficult and confusing part of the process for those who are new to it. I see the advantages, but I also understand those who need their entire paycheck to make ends meet.

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The headline of the article is misleading: employees can opt-out under this proposal, so nobody is being required by law to save in this scenario.  (I suppose one could say most employees--and employers--are "forced" to contribute to Social Security, though.) Opt-in by default seems like a clear improvement on the current situation, which leaves so many unprepared to fund a comfortable retirement.  I agree with Thaler in the article, when he says a 3% contribution is probably too low; he suggests 6% as a default starting point, which can be adjusted if problems emerge.

People sometimes can't spare a penny for savings and may not be able to meet basic expenses with their current income.  But among those who get a regular paycheck as an employee with benefits like a retirement plan, many (the majority, I'm guessing) can get by with 2, 3 or 5% less in their take-home pay without major sacrifice, just as they manage to make due now after taxes are deducted from each check.  

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