Poll: Should Retirement Savings Be Mandatory?
In preparation for our upcoming forum on mandatory retirement savings, we asked the readers of CFA Institute Financial NewsBrief to consider four options for retirement saving, ranging from a mandatory, government-imposed solution to do-it-yourself saving.
Should saving for retirement be:
A striking majority of the 975 respondents in the global poll — 45% — chose “mandatory, whereby individuals are forced to save into private retirement plans via their employer,” followed by 22% of respondents who said that saving for retirement should be “elective, whereby employees are automatically enrolled in private retirement plans but can opt out if they so choose.”
Respondents were evenly split — at 17% and 16%, respectively — between the remaining options: “mandatory, whereby individuals are forced to save into government retirement plans via taxes,” and “elective, whereby employees are free to save and invest (or not) for retirement as they see fit.”
Respondents in the Asia-Pacific region also overwhelmingly voted for mandatory savings into private plans — 51% — followed by a tie at 20% between forced savings into government plans via taxes and the freedom to save and invest (or not) as they see fit. Many people regard Australia’s retirement system — which has two key components: a means-tested government benefit and a mandatory savings account financed by employers — as among the best in the world. Now some in the United States are calling for a similar solution — a mandatory defined contribution retirement savings plan — as a way to address the looming pension crisis.
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.
The idea of mandatory savings is in response to a much broader dilemma: to what extent can we interdict into a personal life to save that person from destruction? Historically the answer, apart maybe from the closest relatives, has been next to nil. But as we weave ever denser social contracts the thought is that if we, as a society, are mandated to bail someone out then we, as a society, have the right to compel that person’s good behavior. This runs smack into the notion of personal freedom and a significant, though not exclusive, reason for that personal freedom: the ability to become a fully mature adult who ultimately, though often indirectly, contributes to a healthy, vibrant society.
Another way of putting this is that the more we compel behavior the more we foster dependent drones who, at some level of dependency, society decides should serve society rather than vice versa. At which point welcome to the brave new world!
Admittedly, this is slightly headier stuff than finding next quarter’s alpha …