401(k) Specialist Issue 1 - 2021 - 5

EDITOR'S LETTER
Rational Actors
NOBEL LAUREATE AND 401(k) Specialist cover subject Richard Thaler responded to
a recent tweet from his Nudge co-author and Harvard Law professor Cass Sunstein
about new auto-enrollment research from Wharton's Olivia Mitchell and others.
The brainpower in that one sentence had us hooked and redeemed the shoutfest
cesspool Twitter had become after a rough election cycle.
Mitchell and her colleagues took a close look at OregonSaves, the first-of-its-kind,
state-sponsored auto-IRA program for employees not covered at work.
" Who opts out of automatic enrollment? " Sunstein asked. " Evidence [demonstrates]
that those who opt out are often doing so rationally. "
" Why we prefer nudges to mandates, " was Thaler's characteristically blunt reply.
A bit of a dig at the Beaver State solution, but it's just one aspect of the findings,
and the others appear promising.
" We find that the program is serving employees across a range of industries,
but primarily those with low wages and high turnover, " the authors note-in other
words, exactly who it should.
They report that over 67,700 accounts had account balances totaling $51.1 million
in assets as of April of last year.
" While participation rates are lower than in other settings, " they note, " only 11%
of OregonSaves participants have existing retirement assets. For everyone else, the
counterfactual retirement saving rate is near 0%. "
They put a positive spin on the low participation/high opt-out rate, calling the
choice " reassuring in a sense because they are likely to reflect an optimal decision to
prioritize current consumption (for which the marginal utility is high) over savings. "
Unfortunately, the program is subject to the same pandemic-related withdrawal
rates seen in its private sector counterparts. But again, more optimism about the
value defined contribution plans provide in a crisis overall:
" This is not to undermine the value of the saving program; rather, it highlights the
key role that OregonSaves accounts are playing for lower-paid workers in times of
earnings and employment volatility. "
So, despite skepticism from players like Ted Benna and Andrew Biggs, who believe
the program is partly offered in a cynical bid to reduce expenditures for state
aid, it appears to work-a bit of good news that is sorely needed.
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ISSUE 1 2021 | 401kSpecialist.com
3
Issue 4, 2020 |
401kSpecialist.com
JOY
THE
OF JANIA
2020's Top Advisor
by Participant
Outcomes (TAPO)
401k_Issue 4 2020.indd 1
10/2/20 9:20 AM
Issue 2, 2020 |
401kSpecialist.com
Is There
Really A
RETIREMENT
CRISIS?
Coronavirus upheaval aside,
Andrew Biggs lets the math
make the argument
+
Ready or Not,
Here Comes Reg BI
How to Thwart
Would-Be 401(k) Hackers
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401(k) Specialist Issue 1 - 2021

Table of Contents for the Digital Edition of 401(k) Specialist Issue 1 - 2021
