401(k) Specialist Issue 1 - 2018 - 4

EDITOR'S LETTER
Automatic for the People
THE PROBLEM OF FINANCIAL SCARCITY is real and ruthless.
As MassMutual's Viability guru Hugh O'Toole frequently notes, a truck driver
behind the wheel of a 70,000-pound semi distracted by zero savings and the next
house payment might stop for comfort food in the form of a large No. 3, extra crispy.
The combination of sitting, eating and stressing isn't exactly a recipe for safety,
and reinforces critical links between health and financial wellness.
Yet the connection is only now beginning to be made. Aegon recently found
that health and wealth in retirement are closely linked, however a " stark gap "
exists when it comes to people's expectations versus reality.
For example, their 2017 study said well over half of workers envision some form
of work in retirement, yet almost 40 percent retire sooner than planned, with
almost a third of them doing so for reasons of ill-health.
The key, of course, is in influencing behavior, an area where science reigns
supreme. It's something UCLA behavioral economist Shlomo Benartzi is all over. He
points to a specific instance involving Britain's National Health Service using data it
collects on health and longevity to make customized annuity recommendations.
The Tea Party would trip out at the potential HIPAA violations if something similar
was tried here, but it's an intriguing concept. Apply the lessons learned from
auto-features to financial wellness and it gets exponentially more so, something
in which T. Rowe Price is beginning to dabble.
Recognizing the positive effects auto-features have had on retirement plan participation
and savings rates, the Baltimore-based investment behemoth is looking
to other sources of financial stress.
In December, the company announced the integration of an online cash flow
management tool, DoubleNet Pay, into T. Rowe's DC plan participant program.
The tool " allows individuals to take control of their competing financial priorities
by automating their spending and saving for short- and long-term goals. "
Years ago, we wrote about the work of Kahneman, Thaler and others in the behavioral
science discipline, and how amazing it will be when it moves
beyond savings and sports (Moneyball) into other realms in some sort
of integrated fashion.
It's starting to happen, and it's really cool.
ONLINE
EXTRA
John Sullivan
Editor-in-Chief, 401(k) Specialist
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401(k) Specialist Issue 1 - 2018

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