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Reining In Financial Advisers May Help — But Americans Still Aren't Saving


We've just heard about proposals to rein in retirement advisers, but there is another big challenge that the rules won't address. Americans simply aren't saving enough money for retirement. Many don't have a financial adviser or a retirement account. NPR's Chris Arnold reports on personal finance, and he joins us now. Hi, Chris.


SIEGEL: So this is a bigger problem - the fact that people just aren't saving.

ARNOLD: Well, Robert, I would say they're both big problems, but yes, you are absolutely right. Most Americans are not saving at all or very much, and if we look at the research, more than half of working American households have saved less than $10,000. And just over half of working households are currently saving anything for retirement. And then let's zoom in just on people, say, in an age group where they really should be saving - 45 to 55-year-olds. I mean, OK, retirement's around the corner. Half of those people have saved less than $25,000. So economists take a look at all this and that makes them very nervous about the future.

SIEGEL: And yet we assume that people know that they should be putting aside money for retirement, don't they?

ARNOLD: Absolutely and even when people do surveys and they say ask Americans what's your number one financial concern? The answer is having enough money to retire. So people really do want to do this. So there's really two issues here. Number one - how do you get more Americans to start saving? And then when they do, how do you help people make the right investment decisions to avoid giving away a big chunk of their returns to financial advisers and to Wall Street? Both are important and it's the latter of those that the president's been focused on today.

SIEGEL: So the initiative announced by the White House today doesn't address that first problem of people not saving enough. What could be done about that?

ARNOLD: Well, Robert, this gets us into the interesting realm of behavioral economics. And people who study this question that look - a lot of Americans want to save. It's really important. They need food to eat down the road, but they don't do it. Why not? So apparently some of this goes back to our primitive selves, if you will. That behavioral economists say we are just wired to prioritize problems that are right in front of us, not our needs many years down the road.

SIEGEL: So how do you nudge people to think more long-term rather than the way they say we are wired to think?

ARNOLD: That's an excellent question, and if you make something automatic people will do it. So if when you get a job, Robert, you go in, you fill out your W-2 forms and everything else - if right then you're automatically signed up to start saving for retirement, some of your money's going into that, you have the choice to opt out if you don't want to. But it turns 90-plus percent of people will stick with it and save. So this is something that could really make a difference.

SIEGEL: You're saying as opposed to having the burden of opting in. In that case, you're saying far fewer people actually save for retirement.

ARNOLD: Right, and we're seeing now, at bigger companies, they've been doing this. They're having some success. The problem is a lot of people don't work for big companies. They don't have access to 401(k) retirement plans. So other developed countries - this is interesting, too - have gone much further. In England, for example, there's a new law that's being phased in where employers of any size - you know, burger joints or taco stands or whatever - they have to enroll their employees in some kind of retirement plan to get everybody saving. And so far that seems to be going pretty well.

SIEGEL: NPR's Chris Arnold. Thanks, Chris.

ARNOLD: Thanks, Robert. Transcript provided by NPR, Copyright NPR.

NPR correspondent Chris Arnold is based in Boston. His reports are heard regularly on NPR's award-winning newsmagazines Morning Edition, All Things Considered, and Weekend Edition. He joined NPR in 1996 and was based in San Francisco before moving to Boston in 2001.
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