There are some good ideas in this article for 401(k) plan design: “The (K)oncept Plan – 2004 Model.” (Article by Steve Lansing via the 401khelpcenter.com.) Quote of Note:
Employers should see their role as being a partner with the employees to help them achieve financial security in retirement. . . .There are many heuristic tools (short cuts) that can be employed to finesse participants into actions they acknowledge are desirable but seem unwilling to take. Accepting this premise is to understand that most people are not risk adverse investors (rational economic agents) but are loss adverse savers. Indeed, a recent EBRI study labels certain people as “strugglers, impulsives and deniers” when it comes to planning their financial future.”
Some additional food for thought here: “Chill descends as boomers rethink retirement plans.”
Finally, from Jagadeesh Gokhale at the Cato Institute: “The Future of Retirement in the United States.” The article offers a unique perspective on 401(k)’s:
A recent study that I co-authored analyzes the potential lifetime gains from participating in 401(k) plans and Roth IRAs. These plans are almost universally recommended for households as a way of saving on their lifetime taxes. However, the study’s surprising result is that low-earners who make substantial contributions to their 401(k) accounts and receive moderate to high rates of return on those contributions, could end up paying more in taxes on a lifetime basis. . . .How many U.S. households actually face this jeopardy? I am currently co-writing a study on this issue using survey data from the Board of Governors of the Federal Reserve. A preliminary result from this study suggests that roughly 10 percent of participating households may suffer an increase in lifetime taxes (and a reduction in lifetime consumption) as a result of continued participation at their current levels in 401(k) plans.