Mark Thoma suggests that setting a “really bad default” would likely make people start paying much more attention to their retirement planning in the form of employer-sponsored 401(k) plans. He links to this NYT piece that suggests perhaps a default contribution rate of 15% pre-tax salary would be enough to get people involved.
Now, I don’t really have a fundamental problem with requiring that all 401(k) plans be opt-out rather than opt-in. Yes, I worry that eliminating the opt-in option might make it more appealing for some employers to scrap the plan entirely or reduce their matching rates than to have an opt-out plan: in which cases either nobody wins or people win less than they’d have liked, respectively. I also have some concerns about spiking the number of participants fiduciaries must pay attention to overnight, but that’s not really a primary concern.
However, even if Thoma and the NYT are right that persuing this policy would increase the savings rate and make people pay more attention to their retirement planning, is it something we should do? The answer is no.
It is not the government’s job to make sure people save for their retirement, it is not the duty of our duly elected officials to baby us or nag us into doing what is right. The objection raised is that then people will end up on the dole, and that will cost the government more than this policy would. While this statement is trivially true, it doesn’t address the problem: the problem is not that people may end up on the dole, the problem is that the dole exists in the first place. Yes, that’s hyperbolic, but the point is simple; if you make getting handouts easier than doing for oneself, a lot of people are going to take handouts.
What’s more, once you authorize government to dictate to you how much you should be saving for your retirement, over and above the theivery done on behalf of the odious Medicare and Social Security ponzi schemes, you empower it to tell you any number of other things. By giving government that much power over your household budgeting decisions by default, you might as well let them give you a grocery list to shop from every week. Sure, you’d be free to change it, but Uncle Sam would make the first one…just to ensure that you’re getting a balanced diet. Perhaps our benevolent Senators and Congresscritters should set some budgeting guidelines for car payments as a percentage of take-home pay, or how much you spend on your house payments as a general guideline…it doesn’t end once you’ve started.
There’s no fundamental difference between some jackass Congressman telling me I don’t have my discount rate set correctly and that same jackass Congressman telling me I’m spending too much money on food. In fact, there is no difference at all. Savings is simply trading present consumption for future consumption plus real return, is there a compelling reason why some DC wanker knows more about the rate at which I’m willing to make this trade-off than I do? Lord no.
I’ll be the first to tell you that people generally don’t save enough for retirement, particularly the young. Starting early and maintaining the right portfolio balance at each phase of your life are the two most important tricks to having enough, and it’s very important to plan for that. There’s a great moral and economic case to be made for such things, and only a fool would say otherwise. However, it is my right as an individual to spend my earnings however I damn well please. If I want to consume at a rate of 90 cents per dollar, well, that’s my right. Hell, if I want to spend every last cent I earn on liquor and guns while using my credit cards to prop-up the lean times that’s also my right.
Part of freedom is the freedom to screw up in a spectacular way. Saying that the government is there; that the government “has got to move” when somebody hurts; that good ol’ Uncle Sam will be there during hard-times for you infantalizes the whole citizenry. Treating people like spoiled, incompetent children is no way to make them behave like adults. Besides, government isn’t my mother, it can’t make me behave like an adult if I don’t want to. Neener Neener.
