PLANSPONSOR - October-November 2022 - 2

Say What?
INSIGHTS
PUBLISHER: Alison Cooke Mintzer
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" E
conomists Say, 'Enjoy Your Youth and Save Later,' " reads the headline of a
recent story on our website. Research published in the Journal of Retirement
argues that workers should not be saving for retirement in their 20s but
instead wait until their 30s-or even 40s. " The idea that more retirement saving
is always better-regardless of age and circumstance-needs to be challenged, "
writes one of the authors of the paper, Sita Slavov.
The framing of the research gives me pause. It goes against so much of what
we consider a mantra in the world of employer-sponsored retirement programs-get
them into the plan as early as possible and saving what they can from the start.
The researchers-Slavov, who is professor of policy at George Mason University;
Jason Scott, management director at J.S. Retirement Consulting; John Shoven,
professor of economics at Stanford University; and John Watson, a lecturer of finance
also at Stanford University-say the purpose of saving for retirement is to keep one's
spending about as steady as possible through the course of one's life, even when no
longer working. Does anyone think that spending throughout life remains stable?
As we know too well, people probably have the least number of responsibilities when
they're young.
So why suggest waiting to save for retirement? Well, they note that most workers,
especially higher-income workers with college degrees, will see pay increases over the
course of their career, which means that dollars saved when someone's in her 20s are
worth more than when she's older. And, as people value consumption most in their
youth, and there's increasing mortality risk as they age, it can be better to make large
purchases such as new cars earlier so they can be enjoyed more fully and longer.
A quick side note: The researchers do observe that lower-income workers are of
special consideration with retirement plan guidance. Social Security will provide a
decent replacement ratio of income when they retire. For that group, research says
they would see a more stable income curve over their life by postponing saving for
retirement into their 30s.
Overall, I could get the issues raised about smoothing spending and knowing
that many people have more pressing financial issues when younger-paying for
school, paying off student loan debt or buying a home, etc.-if the study was talking
more about these other savings needs. But it lost me when the researchers argued
against calling the employer match " free money " and suggested that some shouldn't
forego consumption in order to collect it. The research says the money that's being
directed into the retirement plan to earn the match would be more valuable to workers
in their 20s-due to their lower income and the higher utility of that money-for
consumption at that time. Again, I find this surprising.
I'm sure the researchers are correct in some ways about how people's money
and investments could work in an ideal environment. And we know that competing
priorities for cash make it a challenge to prioritize how to allocate income. But I think
by emphasizing the concept of consumption, vs. saving for whatever the need, earlier,
the messaging of the research gets lost. Maybe we shouldn't make participants feel
guilty about falling short of that 10% to 15% target savings rate in the plan. But
knowing what we do about the financial instability of so many Americans, perhaps
we should continue to discuss allocating what you can to important savings or debt
needs instead of emphasize spending. -Alison Cooke Mintzer, Publisher
2 PLANSPONSOR.COM October - November 2022
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PLANSPONSOR - October-November 2022

Table of Contents for the Digital Edition of PLANSPONSOR - October-November 2022

INSIGHTS
INDUSTRY ANALYSIS
RULES & REGULATIONS
UPFRONT
Deep Dive
Managing Volatility
New Solutions
Participant ESG Demands
Good Practices
FIDUCIARY FORUM
INSIDE ANGLE
PLAN PROFILE
PLANSPONSOR - October-November 2022 - Cover1
PLANSPONSOR - October-November 2022 - Cover2
PLANSPONSOR - October-November 2022 - 1
PLANSPONSOR - October-November 2022 - INSIGHTS
PLANSPONSOR - October-November 2022 - 3
PLANSPONSOR - October-November 2022 - RULES & REGULATIONS
PLANSPONSOR - October-November 2022 - 5
PLANSPONSOR - October-November 2022 - 6
PLANSPONSOR - October-November 2022 - 7
PLANSPONSOR - October-November 2022 - 8
PLANSPONSOR - October-November 2022 - 9
PLANSPONSOR - October-November 2022 - UPFRONT
PLANSPONSOR - October-November 2022 - 11
PLANSPONSOR - October-November 2022 - 12
PLANSPONSOR - October-November 2022 - 13
PLANSPONSOR - October-November 2022 - 14
PLANSPONSOR - October-November 2022 - 15
PLANSPONSOR - October-November 2022 - Deep Dive
PLANSPONSOR - October-November 2022 - 17
PLANSPONSOR - October-November 2022 - 18
PLANSPONSOR - October-November 2022 - 19
PLANSPONSOR - October-November 2022 - 20
PLANSPONSOR - October-November 2022 - 21
PLANSPONSOR - October-November 2022 - 22
PLANSPONSOR - October-November 2022 - 23
PLANSPONSOR - October-November 2022 - 24
PLANSPONSOR - October-November 2022 - 25
PLANSPONSOR - October-November 2022 - Managing Volatility
PLANSPONSOR - October-November 2022 - 27
PLANSPONSOR - October-November 2022 - 28
PLANSPONSOR - October-November 2022 - 29
PLANSPONSOR - October-November 2022 - New Solutions
PLANSPONSOR - October-November 2022 - 31
PLANSPONSOR - October-November 2022 - 32
PLANSPONSOR - October-November 2022 - 33
PLANSPONSOR - October-November 2022 - Participant ESG Demands
PLANSPONSOR - October-November 2022 - 35
PLANSPONSOR - October-November 2022 - Good Practices
PLANSPONSOR - October-November 2022 - 37
PLANSPONSOR - October-November 2022 - FIDUCIARY FORUM
PLANSPONSOR - October-November 2022 - INSIDE ANGLE
PLANSPONSOR - October-November 2022 - PLAN PROFILE
PLANSPONSOR - October-November 2022 - Cover3
PLANSPONSOR - October-November 2022 - Cover4
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