The Case Against 401(k) Automatic Enrollment

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Emily, here is what you are wrong about in this article: everything.
The only way to invest money for the future is to INVEST MONEY. You have very lofty utopian dreams of magical seminars that will open people's eyes and inspire them to educate themselves about retirement planning.
But those seminars never come to pass.
What is important about them having money is saving it now. No amount of seminars is going to help them invest their money. Investing their money is going to help them.
As far as visiting payday lenders and low-income employees, the only thing that is going to help them with their future money is investing some present money.
The most successful revenue stream on earth is the US income tax. Why is it so successful? Because it is taken out of everyone's paycheck before they have a chance to visit a payday lender or turn that cash to trash.
When people are automatically enrolled, THEN they will get interested in educating themselves about money, choices and retirement, because they will have skin in the game.
Nothing else works. History says so. We have all the educational seminars about money that could possibly exist, right now. How is that working for low-income people? Not so good. How is it working for payday lenders? Pretty well.
Automatic enrollment is the future, and more importantly, a better future for everyone.

Anthony Migyanka of TX 6:27PM July 03, 2009

Auto enrollment is great for the mutual fund industry, but it's also great for getting regular workers to start saving something for retirement. A large percentage of 401(k) investors make no changes to their plans, regardless of market activity or the type of plan they're in, but all of them have the opportunity at any time to take control, change their asset allocation or opt out of the plan entirely.
Employers need to educate plan participants so they will have the knowledge to make the right choices that best suit their individual retirement savings needs. But until investors take control of their destiny, plan sponsors should be looking for the best automatic default option, such as an age-appropriate target-date fund with auto escallation and auto-rollover features when they change jobs.

JM of NY 1:36PM July 01, 2009

401-K is a tax code exemption originally meant to benefit over compensated executives at General Electric. It was NEVER meant to be a retirement plan for the entire population. But Wall Street investment banks saw HUGE profits in getting the entire population to mindlessly buy mutual fund products. Wall Street lobbied Congress to make it easier for all to participate and funded the propaganda and mis information that has convinced people the 401K is a retirement plan.
The stock market is a ZERO sum Gain contest. If you win somebody else has to loose. A HUGE number of us have to loose in order to pay for the latest rip-off of all time.
All the expertise in the world will not make a difference.

Dean of OR 10:11AM July 01, 2009

The problem with automatic enrollment is you don’t have to make any decisions and people don’t have any idea about matching versus not matching and what the level of the match is. It’s a very paternalistic system. People just don’t want to think about it. Automatic enrollment was designed to be just one part of your retirement savings along with your pension and Social Security. People are also going to have to open supplemental retirement accounts and make decisions about how much to save and how to invest and how to track it. If you take some financial responsibility for your own decisions you will be much better at crisis management than if you were automatically enrolled because you have some ability to ahoknow what is going on.

jks of KY 8:23AM July 01, 2009