June 2, 2018

OPT-OUTS, NOT OPT-INS:

How can you build wealth when you don't have enough money? This guy has the answer (Elyse Steinhaus, May 29, 2018, Marketwatch)

Nearly 20 years ago, you and Nobel Laureate Richard Thaler developed 'Save More Tomorrow,' a program that helps people shore up a secure retirement. Can you tell us more about that?

Benartzi: Save More Tomorrow [is] a savings tool that consists of three central components: First, we asked people to commit now to saving more in the future. This helps them avoid 'present bias,' or the tendency to overvalue immediate rewards at the expense of long-term intentions. Second, we proposed that increases in their savings rates were linked to future pay raises. This minimizes the influence of loss aversion--the tendency to experience the pain of loss more intensely than the pleasure of an equivalent gain--since their take-home pay never decreases. Third, once enrolled, [employees] remained in the program unless they opted-out. This makes good use of inertia, which is the tendency to stick with your current path.

According to the latest calculations, it's estimated that [Save More Tomorrow] has helped approximately 15 million Americans significantly boost their savings rate.

Posted by at June 2, 2018 4:29 AM

  

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