Under-saving for retirement is a major issue for many economies. Benartzi and Thaler (2013) have long diagnosed a ‘retirement savings crisis’. In the US, according to the National Retirement Risk Index, 39% of working-age households will not be able to maintain their standard of living in retirement.
- Individuals face difficulties in making savings decisions due to the complexity of determining savings amounts and how to allocate assets, compounded by behavioural issues like ‘present bias’ and procrastination.
- Many savers also prioritise having immediate access to liquid savings, which can hinder their commitment to long term retirement savings. We review the effects of various reforms implemented in different countries to promote private retirement savings.
- Tax incentives have proven to be an efficient tool to boost retirement contributions especially for the most ‘active’ savers, and older and wealthier individuals. Encouraging automatic contributions from employers to retirement plans may be more effective to support a wider range of individuals to invest on the long term. Providing information on retirement saving needs can also be beneficial.
- Using engaging tools like virtual reality, especially through financial advisors or accessible digital platforms (e.g., robot advisors), can enhance decision making.
You can now read the full whitepaper at the link below
