Firms are boosting automatic retirement-savings rate, but there is some pushback from employees:
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Source: WSJ
Nudge? More Savings, Less Choice
October 16, 2015 9:00am by Barry Ritholtz
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It is a different form of choice an opt out not an opt in, so it is not really less choice just a different form.
The defaults only apply if your to busy or ignorant to take any action. (Typically on a web site)
Now they / someone just has to produce the 12%+ annual alpha to make up for the contribution deficits and 401k withdrawals that have occurred over the last 2 decades. And this, at a questionably high valuation, forward 10 year expected return of 1% for US equities as posited by Research Affiliates http://www.researchaffiliates.com/AssetAllocation/Pages/Equities.aspx ?
It is not a bad idea to make “a good decision” the default; but allow the really stupid people and the really smart people to opt out and make their own decisions. As long as we have a solid social security system to keep the really stupid people from becoming homeless (after the Wall Street predators have cleaned them out), the loss to society (from giving morons the freedom to “f” themselves) is acceptable. However, my guess is that the sharks will not be happy with the number of people making stupid decisions. So we will likely soon se schemes to try and lure more ignorant people out of the safe defaults and into inappropriately risky and expensive choices. Question is do the 401K plans have a fiduciary duty – or is that something we will have to add after the catastrophy.
Opting out may not be stupid if one has student loans to pay or credit card debt accumulated through a long period of unemployment. A guaranteed 10% or 18% return is better that putting your money into the stock market. After a two year period of unemployment, I joined the 401K at the minimum 1% level. After paying off my bills, I upped it to 6%. No matching contributions in my case.
Divorce and severe illness are other reasons to pay debt before putting money in a 401K. I figure mortgage debt and car loans don’t count. they are more like renting.