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Professor Richard Thaler. A few years ago Thaler, along with
his frequent collaborator, Professor Shlomo Benartzi, pioneered
a savings program called Save More Tomorrow. 6
We all know that people don’t save enough for retirement
(remember the statistic shared earlier where only 16 percent of
workers feel confi dent about their retirement savings?). But peo-
ple also aren’t particularly willing to reduce their take-home pay
and stick the money in a retirement savings account. The Save
More Tomorrow plan asks people to save more, but not today.
Participants in the plan commit to increasing their savings
rate as they get pay raises. This way, they never see their take-
home pay decline; it just doesn’t go up as much. Moving some
of the present costs of saving into the future makes the goal of
saving money seem appealing to folks who might not consider
a more traditional savings plan (the people who have a high
discount rate for the future).
The plan proved to be a startling success. At the manufac-
turing company where the plan was fi rst pioneered, almost 90
percent of employees sat down with a fi nancial consultant who
basically told them (no surprise) that they needed to save more.
About a quarter of folks took the advice and increased their
savings. The rest, unwilling to cut their current take-home pay,
were offered the Save More Tomorrow plan. Those who joined
committed to increase their savings by 3 percent every time they
got a pay raise (which were running about 3.25 to 3.5 percent
at the time).
Over a three-year period, the 10 percent or so of people
who never met with the fi nancial consultant at all saved a fairly
steady 6 percent. The group who met with the consultant and
took his advice to increase their savings went from saving about
4 percent to about 9 percent. And the Save More Tomorrow