The August issue of Money Magazine has an article, "The Campaign to Make You Behave," by Stephen Gandel. It is not freely available online. The article review some interesting new economic theories and how public policy could implement them, with a comparison of McCain's and Obama's plans in this regard.
One example is the theory that we should have opt out instead of opt in retirement policy. Implementing this would mean companies can automatically enroll new employees into a retirement plan for a set percentage of their salary. Something similar to smart meters are mentioned in regards to persuading people to voluntarily change their energy usage patterns. There is another section on using this strategy for health care. It is interesting.
As one might expect Obama scores higher in the comparison. Many of our tax policies are designed to reward behaviors we judge to be for the greater good. Home ownership for example, is rewarded with tax deductions for mortgages. We now discourage smoking. And so on. (Those are my examples, not necessarily from the article.)
For more info read Nudge: Improving Decisions About Health, Wealth, and Happiness, by Cass Sunstein and Richard Thaler.
How does Congresswomen Allyson Schwartz (D-13) fit in? At then end of June she co-authored a resolution honoring National Save for Retirement Week.
This week Congress passed National Save for Retirement Week, a resolution authored by U.S. Representatives Allyson Schwartz (D-Pa) and Sam Johnson (R-Texas). Prior to the vote, Schwartz spoke on the House floor to encourage her colleagues to support this important measure recognizing the vital need for American families to plan for retirement, especially given the current economic uncertainty.
Schwartz’s statement follows.
“The resolution before us supports the goals and ideals of National Save for Retirement Week, which this year falls between October 19 and October 25, 2008. I want to thank my colleague, Mr. Johnson of Texas, for working with me to bring attention to the importance of retirement planning for American families.
“We are living in a time when workers are being asked to shoulder an increasing share of the cost of saving for retirement. Even with an employee-sponsored retirement plan and the promise of Social Security benefits, Americans need to put additional money aside to ensure a financially secure retirement.
“For many Americans, saving is becoming an increasingly difficult task as they struggle to meet their everyday obligations. Even in solidly middle-income families, financial resources are stretched thin as parents work to meet other pressing needs, whether it's purchasing health care coverage, paying for college, buying a tank of gas, or simply paying monthly bills on time.
“Over the past several years, we have seen a dramatic shift in our retirement system. Most workers are no longer eligible for traditional pensions, which provide a predictable monthly benefit throughout retirement. Instead, workers are bearing more of the costs and investment risks of saving adequately for their retirement through workplace defined contribution plans, such as 401(k)s or through IRAs.
“As a result, the value of most Americans' retirement benefits, and the security of their retirement, is now directly linked to their own decisions and the amount of dollars that they save over the years and the balance held in their accounts when they retire.
“The dramatic shift towards individual defined contribution plans is clear. According to Employee Benefits Research Institute, only 10 percent of workers are currently covered by defined benefit plans, compared to 63 percent of workers who are currently covered by 401(k) plans. This stands in stark contrast to the reality of 30 years ago when it was just the opposite, when coverage rates were 62 percent for defined benefits plans and 16 percent for 401(k)s.
“While this shift is empowering American workers to make more of their own financial decisions, many families are finding it difficult to save significantly to meet their retirement needs. It is particularly difficult during a time of economic uncertainty, as we are experiencing today.
“It may be difficult but continues to be vitally important for Americans to prepare for retirement, to think about savings, especially given that half of all workers have less than 25 percent in total savings, whether for retirement or to help them in periods of financial difficulty.
“As our country shifts towards an increasing reliance on individual savings and as families are tempted to dip into their retirement accounts to meet current everyday expenses during this time of high gas and food prices, it is more important than ever that we educate Americans about the pressing need to save even small amounts every year that they possibly can.
“In my district, I have partnered with banks and credit unions and other financial institutions to host seminars to help provide information on how to make educated, financially responsible decisions about personal and family budgets and to help establish a habit of saving for the future.
“I have even visited with schools in my district to help reach out to young people in order to emphasize the importance of saving for the future. It is never too early to learn that every little bit we save now will help in the long run.
“So whether you're a 16-year-old receiving your first paycheck, or a 25-year-old getting your first real raise, or a 45-year-old with a mortgage and two kids, the habit of putting a little bit away every month in regular savings can, with the help of compound interest, add up to a more secure retirement.
“The resolution before us supports and encourages educational opportunities on a national scale and creates a collaborative effort to emphasize the importance of making savings for retirement a priority for all Americans.”
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