Practical analysis for investment professionals
02 October 2013

Recommended Reading on the Retirement Crisis: Is Mandatory Savings the Way Forward?

Mandatory retirement savings accounts is a hot topic, as evidenced by buzz around Meir Statman’s recent article in the Financial Analysts Journal, as well as the number of recent articles and blog posts tackling the issue of pension security. While a number of people are calling for mandatory retirement savings for employees in the United States, there is vigorous debate as to whether this is the way forward.

“We’ve created tax incentives to get people to participate in their 401(k), we’ve reduced the number of options in a 401(k), realizing that too much choice was overwhelming. . . . Despite all of this, we still don’t have enough people saving enough money for their retirement,” said Chris Farrell, economics editor of Marketplace Money, on a recent Marketplace Morning Report. The solution? What Farrell says is a “toxic” word in Washington, DC: mandatory savings.

Should saving for retirement be mandatory in the United States in the sense that individuals (through their employers) are forced to make contributions to a private retirement plan, as they are in Australia? (Australia’s retirement system has two key components: a means-tested government benefit and a mandatory savings account financed by employers.) What are some of the concerns over mandatory retirement savings plans? Should people, on principle, be free to choose what they do with their money? Or should the government be “nudging” workers who are not disciplined about saving with a all-out “shove”?

To explore some of the issues surrounding the crisis retirement funding globally, CFA Institute is hosting a Future of Finance forum on whether retirement savings should be mandatory for employees. The discussion will take place on this blog from 9–11 October 2013 and our distinguished panelists include Meir StatmanTeresa GhilarducciStuart LeckieRichard Brandweiner, CFA; and Jacco Heemskerk, CFA.

For some background reading, here are some articles, research reports, and blog posts:

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

About the Author(s)
Lauren Foster

Lauren Foster was a content director on the professional learning team at CFA Institute and host of the Take 15 Podcast. She is the former managing editor of Enterprising Investor and co-lead of CFA Institute’s Women in Investment Management initiative. Lauren spent nearly a decade on staff at the Financial Times as a reporter and editor based in the New York bureau, followed by freelance writing for Barron’s and the FT. Lauren holds a BA in political science from the University of Cape Town, and an MS in journalism from Columbia University.

1 thought on “Recommended Reading on the Retirement Crisis: Is Mandatory Savings the Way Forward?”

  1. Aaron Cohn says:

    I have no doubt we’ll see this here. But I think the motivations won’t be so beneficent. When (not if) foreigners no longer want to hold our government’s toxic debt, somebody will have to. Undoubtedly there will be a forced contribution to treasury debt from pension funds if they aren’t simply stolen outright “for safety and your own good”. The hint of it will cause many high net worth individuals to flee the job market if not the country altogether. With bail-ins becoming the rule worldwide, spreading from Cyprus to Poland to Italy, the answer in the best interests of individuals is fleeing the banking system, not becoming more intimately involved with it.

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