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Overcoming Inertia: Do Automated Saving and Investing Strategies Work?

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Abstract

Many workers do not take advantage of savings opportunities provided to them at their workplace, nor do they always make wise investment decisions regarding employer plans. Various automated strategies have been implemented by employers with the objective of increasing retirement plan participation and, hence, the financial security of workers. Automatic strategies work by proactively arranging some type of action (e.g., plan enrollment) to occur unless people specifically opt out. This article examines and synthesizes previous empirical research about five automatic savings and investing strategies: (a) automatic retirement savings plan enrollment, (b) automatic contribution increases, (c) automatic portfolio rebalancing, (d) automatic rollovers, and (e) automatic investment plans. Advantages and disadvantages of each strategy are discussed, along with implications for financial educators.

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  1. Specialist in Financial Resource Management, Rutgers Cooperative Extension, Cook College Office Building, Room 107, 55 Dudley Road, New Brunswick, NJ, 08901, USA

    Barbara O’Neill

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  1. Barbara O’Neill
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Correspondence to Barbara O’Neill.

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O’Neill, B. Overcoming Inertia: Do Automated Saving and Investing Strategies Work?. J Fam Econ Iss 28, 321–335 (2007). https://doi.org/10.1007/s10834-007-9063-x

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  • DOI: https://doi.org/10.1007/s10834-007-9063-x

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