THE FEWER CHOICES THE BETTER:

Roger Ferguson: 'A Retirement System for the 21st Century': The TIAA-CREF CEO and ex-Fed vice-chairman tells Bloomberg BusinessWeek what needs to be done to improve Americans' retirement readiness (Business Week, 2/05/10)

ON THE DOWNSIDE OF CHOICE. One of the weaknesses of the 401(k) system may be too much choice in investment options. You can overwhelm people with too much choice. What's optimal is 15 to 20 investment choices.

ON CREATING A RETIREMENT SYSTEM THAT GETS PEOPLE INCOME FOR LIFE. The 401(k) system was never meant to be the core retirement system. It doesn't get you through retirement—it gets you to retirement. People should annuitize for basic expenses, such as rent or mortgage, and utilities [meaning they would receive a set monthly check to cover that amount]. You need the option of secure income for life. If annuities were required—if the government said this is one characteristic that a qualified plan must have—the sponsors would do it. If you wait for plan sponsors, it will only be as fast as the slowest person. [But] individuals should not be forced to take that. Mandated options are not popular and not likely to get through Congress.

ON THE ONE THING HE'D CHANGE TO SHORE UP AMERICA'S RETIREMENT SYSTEM. It's always dangerous to choose one thing that is most important. But the most important thing is to get people to start saving. [Offering participants] advice can be part of that. Auto-enrollment can be part of that. The overarching goal is to get people to save, and to get them to save enough. To get a 70% income replacement ratio [to be able to spend 70% of pre-retirement income in your non-working years], you need to save 10% to 14% of your income each year. It's an eye-opening number for the vast majority of people.