THE KEY TO CHOICE IS NOT LETTING FOLKS MAKE MANY:

Do you want to take control of your nest egg?: As companies gradually move away from pension plans, they use persuasion, guidance, and auto-enrollment to lead wary employees into 401(k) plans (Andrew Caffrey, October 2, 2005, Boston Globe)

Enrollment rates soar at companies that automatically sign up workers, to nearly 86 percent at companies such as Crossroads, well above the national averages. ''It's like a kick in the butt. It's not that easy to opt out," said Laurie Devlin, vice president of administration at Crossroads, which has about 90 employees.

Contributing to your company 401(k) is universally considered a good investment. You get to use pretax dollars, and in many cases the companies will give you free money in the form of matching up to a certain percentage of an employee's contribution. But inertia, procrastination, fear of finances, or just having other demands on their money are some reasons why Americans aren't participating in retirement plans. Currently just two-thirds of eligible employees participate in company 401(k)-style plans, down from three-quarters in 1998, according to research from Fidelity Investments.

Those who do participate usually save too little, make poor investment choices that don't yield enough gains to build a substantial nest egg, or haven't allocated investments among a broad array of funds to limit their exposure to losses.

''Most people are retiring today on a wing and a prayer," Fidelity's chief operating officer, Robert Reynolds, said in a speech in Boston last month.

Noting that the savings patterns of American workers ''will not change on their own," Reynolds said companies and retirement plan providers such as Fidelity must adopt mechanisms that nudge if not outright push people into a sound savings plan. Fidelity itself will do automatic 401(k) enrollment for its own employees beginning Jan. 1.

The proposed mechanisms amount to a retirement plan on autopilot: automatic enrollment, automatic annual increases in contribution rates to ensure workers are maximizing savings, automatic rebalancing of portfolios, and ''life cycle" funds that automatically adjust the investment mix based on workers' age and years till retirement.

Wayne Bogosian, chief executive of benefits consulting firm PFE Group in Southborough, which advised Crossroads on its retirement plan, called automatic enrollment ''probably the most successful administrative change" to 401(k) plans. ''You change the participants' financial future forever, and for the better."

Which should be the model for Social Security privatization but without any opt-outs.

Posted by Orrin Judd at October 2, 2005 8:58 AM