It's appalling to me as a free-spirited Gen-Xer that any American would advocate forcing other people to save for retirement with the paternalistic attitude that it's "for their own good."
According to a recent article by CNNMoney, economist Meir Statman advocates going beyond nudge to shove by making retirement savings mandatory. He suggests forcing people to save 8 percent of their income, adding that ideally people should be saving 15 percent.
It's interesting to me that Statman is a baby boomer who is already at retirement age. Any kind of mandatory savings program wouldn't affect him, at least not directly. Indirectly, forcing masses of people into saving for retirement would, at least, temporarily boost the stock market. Perhaps the true motivation of any forced savings plan would be for the rich to get richer now as opposed to helping the middle class down the road.
Using the positive peer pressure
It's better to simply educate people about investing and saving rather than to take away their financial freedom. If I want to live in the moment and spend all my money on my high priorities today rather than save, that's my prerogative living in a free country.
One successful strategy for encouraging people to save more for retirement has been positive peer pressure. ING, for example, has a program called "Compare Me" which I tried out. It showed me how my finances stack up to people who are just like me in terms of age, marital status and income. I am definitely more motivated to save more for retirement after seeing that I lag behind my peers.
Expanding Social Security
Statman says his mandatory retirement savings would look similar to a 401(k) with employers administering it. Self-employed people would also be affected in a way similar to how the new health care law handles insurance exchanges. I have a feeling their will be an incredible revolt if people found they would not receive a portion of their income. I do agree with one thing that Statman said. He said Social Security is an insurance plan that we use to protect one another from poverty and disability. We shouldn't expand Social Security to the point where we are offering each senior citizen a comfortable retirement. That's up to each person to do on his or her own.
Cutting benefits now
The problem in our country is that a lot of people confuse the Social Security "insurance" with a retirement savings plan. They often neglect to save on their own because they think that they have saved all this money into Social Security. I think people need to have that safety net. One Yahoo Finance article accurately describes Social Security as the "nation's largest social welfare program." Benefits should be cut now instead of allowing the current retirees to deplete all of the funds by 2033. The fact is there aren't enough workers right now to support the level of benefits baby boomers expected to receive. I've receive pay cuts at my job. I don't see why retirees should expect a payout from their retirement insurance plan that just isn't realistic anymore.
I know as I see many baby boomers struggle to retire "comfortably," I'm motivated to save for retirement. Gen-X doesn't need a forced retirement savings plan. They can just look at the failures of the older generation to know which end is up.
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