Automatic enrollment is an idea with broad support across various socioeconomic and political groups. Still, as anyone who has ever observed politics in action, widespread support is no guarantee of adoption. What messages about the benefits of automatic enrollment into a retirement account do people find most appealing? An AARP (Association of American Retired Persons) survey of adults conducted last year, prior to the Obama administration’s proposed nudges, offered respondents six potential reasons.
1) An automatic IRA is a way to help workers save for themselves with a transportable savings account.
2) The cost to all of us is more people don’t start saving for retirement.
3) The 50 million new American workers who will be encouraged to save.
4) Encouraging low-income workers to save.
5) The IRA is a simple and practical way to save.
6) Small businesses that can’t match employee contributions can still provide an attractive savings vehicle to their workers.
Of the options, a majority found the first two “very convincing.” The rest ranged from 33-47 percent.
The most persuasive message in support of the Auto IRA proposal focuses on the portability of the account and the idea that it “enables workers to help themselves.” Promoting personal responsibility is a persuasive message in support of the Auto IRA. Another strong message highlights the cost to all Americans in the future if we do not encourage people to save for retirement now.
The interesting takeaway for policymakers looking to construct popular financial savings legislation and then sell it to citizens is that the idea of automatic enrollment is complimented nicely by a separate idea that is still is part of the bigger theme of simplicity: Portability. What people appeared to tell this pollster was that they preferred the simplest of products: One account that goes with you to any job. Message to financial professionals: The 401k rollover process is cumbersome and annoying.
Again, automatic enrollment is popular whether these specific messages are attached to it. But if you’re looking to devise a law that people support today, and will result in a product they’re likely to support and use 10 years from now, portability should be part or your legislation.