Motivating Retirement Planning: Problems and Solutions

People often find it difficult to make the right decision about retirement savings. The payoffs are in the distant future, and the promise of pleasure tomorrow can mean pain today. The wrong decision yields an instant gain, the outcome is uncertain, the decision can be postponed without immediate penalty. In the end, the pressures of immediate gratification, delayed benefit, the unknown, the uncertain, the uncomfortable, ally against wise decisions. Yet, while many people yield to these influences, many others make the right choice. That drives us to ask why. Recent research has examined various approaches to promoting retirement investment. One promising strategy, automatic enrollment, taps into an old theory about the functional order of behavior and attitudes. This chapter examines the theory to understand why automatic enrollment has a good chance of overcoming the natural impediments to wise decisions about retirement investments.