Popular in Professional

Culture and Society

The City as a Growth Machine: Toward a Political Economy of Place

New York University Harvey Moltoch

Education

The Role of Education in Reducing Racial Inequality

University of Southern California Pedro A. Noguera

Law

Diversity and Social Mobility in the UK legal profession

Law Society I. Stephanie Boyce

Internet Law

The Law of AI for Good

University of San Diego Orly Lobel

Pharmacy

Cytotoxic Activity and Anti-Migratory Effect of Berberine-Phytantriol Liquid Crystalline on Non-Small-Cell Lung Cancer

University of Technology Sydney Kamal Dua

Human Rights Law

Transforming Restorative Justice for Transitional Settings

University of Nottingham Kerry Clamp

Education

Retirement Guardrails

View more insights in Professional - Law - Socio-legal Studies

View more figures from Yale University

View the page of Ian Ayres

Read the Study

Ian Ayres discusses how plan sponsors can monitor plans for likely allocation mistakes and adapt menus to encourage success.

Image courtesy of interviewee. March 15, 2024

Generating Workspace

Export as PDF

This video video presents an analysis of systemic issues within 401(k) retirement plans, authored by Quinn Curtis and another co-author. The core concerns involve the prevalence of poor investment options in 401(k) menus—specifically, funds that are inferior to other available choices, which can lead employees to make misguided investment decisions. The authors emphasize that many plans offer funds that shouldn't be chosen due to better alternatives, and that a significant amount of employee money is misallocated into these “ripoff” funds.

Additionally, the authors discovered a critical failure on the part of plan fiduciaries, who often do not track or analyze how employees are allocating their retirement savings. This video video lack of oversight means that employees may over-invest in high-risk or high-fee funds and fail to diversify effectively.

The authors recommend two strategies for improvement: **streamlining** and **guard railing**. Streamlining involves removing poor investment options altogether, while guard railing suggests instituting limits on how much an employee can invest in specific funds to prevent overexposure to high-risk investments (like gold or certain biotech funds). They highlight the importance of encouraging employees to use more diversified and appropriate investment options, such as lifecycle funds that automatically adjust risk based on age.

Finally, the authors advocate for a systemic change where fiduciaries must become more aware of individual investment behaviors and redesign their offerings to minimize common allocation mistakes. They propose implementing default savings increases, including a potential supplemental Social Security benefit, to bolster employee savings.

Language:

Export as PDF

X-TIMESTAMP-MAP:LOCAL=00:00:00.000,MPEGTS=900000

00:00.145 --> 00:04.565
The book, began ha with two, basic concerns.

00:04.825 --> 00:09.445
One is my discovery with my co-author Quinn Curtis, that,

00:10.145 --> 00:13.845
401k plans often,

00:14.035 --> 00:17.605
include investment options, that no one should

00:18.305 --> 00:21.605
invest in, that they are dominated

00:22.145 --> 00:23.765
by other options on the menu.

00:24.385 --> 00:25.525
And,

00:25.665 --> 00:27.645
and so we found that a substantial number

00:27.645 --> 00:32.085
of plans offer these dominated, ripoff funds,

00:32.225 --> 00:36.085
if you will, and that a substantial amount of money,

00:36.355 --> 00:37.405
ends up in these funds.

00:37.585 --> 00:40.685
So first of all, that's, that seemed to me like a clear,

00:41.345 --> 00:42.605
problem.

00:42.835 --> 00:47.325
It's like having a, a car, that is designed

00:47.715 --> 00:50.405
with a button on it that no one should ever push.

00:50.665 --> 00:52.885
Uh, if you put a button on a

00:52.885 --> 00:53.965
car, someone's gonna push it.

00:54.465 --> 00:57.845
If you put a, an, a menu offering,

00:57.845 --> 00:59.125
someone's gonna order it.

00:59.345 --> 01:03.165
And so that was the, the first motivation for the book.

01:03.665 --> 01:07.245
The second one, grew out of some, consulting work

01:07.245 --> 01:08.885
that I did as an expert witness,

01:09.465 --> 01:14.405
and I discovered that there was a basic, problem,

01:15.035 --> 01:19.125
failure, of fiduciaries to learn

01:19.775 --> 01:24.365
about whether, individual employees were making,

01:24.945 --> 01:27.165
substantial allocation mistakes.

01:27.865 --> 01:32.765
Uh, so there's both the problem that the menus are,

01:33.315 --> 01:35.045
have bad offerings.

01:35.305 --> 01:38.365
But then secondly, I just was shocked that,

01:38.365 --> 01:42.165
these fiduciaries never learn, whether,

01:42.685 --> 01:44.925
employees are failing to diversify

01:45.105 --> 01:49.365
or investing in high, fee funds.

01:49.905 --> 01:52.725
Uh, and that's something that is easy for them to learn,

01:52.785 --> 01:54.125
and they just fail to learn.

01:54.925 --> 01:59.805
Employers have, a fiduciary duty,

01:59.945 --> 02:03.765
to act prudently, in their design

02:04.505 --> 02:06.405
of the 401k menu.

02:06.625 --> 02:09.965
And so it's imp prudent to put in an option

02:09.965 --> 02:11.965
that no one should invest in.

02:12.625 --> 02:17.605
And it's impudent, not to pay attention, to how

02:18.485 --> 02:21.005
employees misallocate their savings,

02:21.195 --> 02:25.605
because learning that can also feed back to their duty on

02:25.605 --> 02:29.965
how they design, the menu so as to protect them.

02:30.265 --> 02:34.165
Uh, if, if you find that too many people are over

02:34.765 --> 02:39.365
invested in an exotic fund, you can streamline your plan

02:39.385 --> 02:41.605
and take that fund out of your menu.

02:42.125 --> 02:46.125
Quinn Curtis and I, we're able to analyze,

02:46.345 --> 02:50.805
the University of Virginia's retirement plan, which is,

02:51.385 --> 02:55.045
as an aside, Quinn and I are both members in that plan.

02:55.245 --> 02:58.325
I was a visiting professor there and started to invest,

02:58.825 --> 03:01.645
And Quinn is a, a tenured member

03:01.645 --> 03:02.885
of the law school faculty.

03:03.545 --> 03:08.175
At any rate, in analyzing this plan,

03:08.875 --> 03:11.975
we found several funds where,

03:12.895 --> 03:16.415
employees were over invested, sacrificing huge amounts

03:16.435 --> 03:19.815
of, of diversification, benefits.

03:20.155 --> 03:24.415
Uh, the, in some ways the,

03:24.535 --> 03:28.215
a powerful motivating example is that, for years,

03:28.615 --> 03:30.095
Virginia offered a gold fund.

03:30.435 --> 03:34.735
And of the people who, invested in gold,

03:35.015 --> 03:38.615
a substantial proportion of them put virtually all

03:38.615 --> 03:42.055
of their retirement savings in this one gold fund.

03:42.435 --> 03:47.215
And going back to this procedural failures, the fiduciaries

03:47.315 --> 03:51.375
of Vir, of the Virginia Plan never would know this

03:51.375 --> 03:53.695
because they're, they're, they're given lots

03:53.695 --> 03:55.295
of information every quarter,

03:55.475 --> 03:58.055
but not on how individual participants,

03:58.395 --> 03:59.935
invest their money.

03:59.995 --> 04:02.135
And it, and it wasn't just the gold fund.

04:02.135 --> 04:03.775
There were other employees

04:03.775 --> 04:06.135
that put all their money into a biotech fund.

04:06.355 --> 04:10.175
And, there's nothing wrong with, investing some

04:10.175 --> 04:12.775
of your money in gold, some of your retirement savings

04:12.915 --> 04:15.695
and biotech that can help you diversify.

04:15.795 --> 04:18.055
You could even be a little bit overweighted,

04:18.075 --> 04:22.295
but you should, it's no reasonable fiduciary would ever,

04:22.595 --> 04:24.495
invest, all

04:24.835 --> 04:28.175
or, a substantial majority of savings in gold.

04:28.235 --> 04:30.655
That's just not a great way to invest,

04:31.195 --> 04:32.375
for the long term.

04:33.315 --> 04:35.315
And,

04:35.575 --> 04:38.475
and this motivating example in our analysis

04:38.475 --> 04:41.515
of the Virginia Plan suggests two different things

04:41.585 --> 04:45.835
fiduciaries can do is they can drop the gold fund,

04:46.165 --> 04:48.835
which is what, university of Virginia did

04:49.105 --> 04:51.075
that helped people.

04:51.535 --> 04:54.555
But there's another strategy, which Quinn

04:54.555 --> 04:56.075
and I call Guard railing.

04:56.145 --> 04:58.195
It's, also the motive

04:58.335 --> 05:02.075
for the title retirement guardrails, where you put a

05:02.615 --> 05:05.875
tap on the maximum amount of your savings that you could,

05:06.375 --> 05:09.155
invest in a particular fund.

05:09.495 --> 05:13.795
And so there's one might reasonably put a guardrail

05:13.855 --> 05:17.115
of 10%, on the gold fund.

05:17.215 --> 05:19.635
So in, instead of eliminating it so

05:19.635 --> 05:22.515
that people don't have the opportunity to diversify

05:22.515 --> 05:26.155
with gold at all, you could allow the keep the fund in.

05:26.935 --> 05:29.915
Uh, but, but put a cap on what it is, on

05:29.915 --> 05:31.075
how much they can invest.

05:31.615 --> 05:34.835
Uh, this guard railing is something

05:34.835 --> 05:36.355
that's not completely new.

05:36.385 --> 05:38.555
It's, we've had it, for years

05:38.985 --> 05:40.595
with regard to corporate stock.

05:40.775 --> 05:42.235
So not universities,

05:42.335 --> 05:47.075
but private companies, often used to,

05:47.605 --> 05:52.075
offer their own stock as one of the retirement plan options.

05:52.855 --> 05:57.525
And this is, in the old days, caused a huge,

05:58.105 --> 05:59.205
losses.

05:59.505 --> 06:02.725
Uh, so Enron, when it went belly up, a lot

06:02.725 --> 06:04.725
of its employees lost virtually all

06:04.725 --> 06:05.965
of their retirement savings.

06:06.705 --> 06:08.805
And in response to the Enron collapse

06:08.865 --> 06:13.245
and other similar stories, now, a majority of companies

06:13.245 --> 06:16.965
that offer company stock as one of the investment options,

06:17.865 --> 06:22.685
put a cap on it, a guardrail that limits the,

06:23.105 --> 06:24.605
the proportion of your savings

06:24.635 --> 06:27.405
that you can put in an versified offering.

06:27.705 --> 06:32.325
It is an under analyzed, aspect of fiduciary law.

06:32.945 --> 06:37.485
Uh, it's often the case that, that if you choose to,

06:37.785 --> 06:42.045
for example, drop, the gold fund, that,

06:42.545 --> 06:45.125
you are, helping,

06:46.435 --> 06:49.255
all the substantial group of e employees

06:49.255 --> 06:51.175
that were over invested in gold.

06:51.715 --> 06:56.215
But there you're also stopping, some

06:56.215 --> 06:58.415
of those investors that had more reasonable,

06:58.415 --> 07:00.935
that were only putting 5% in, let's say.

07:01.595 --> 07:05.775
And so, how, when is it useful to make a change

07:05.805 --> 07:09.815
that is going to help some, employees,

07:10.435 --> 07:11.655
but hurt others?

07:12.115 --> 07:16.695
And, we, support an idea.

07:17.155 --> 07:21.415
The fancy name for it is enhanced Kaldor Hicks, where you,

07:22.075 --> 07:25.175
make changes if you have confidence

07:25.175 --> 07:29.495
that they will help your employees on average without out,

07:29.915 --> 07:33.015
substantially, hurting

07:33.815 --> 07:35.335
a substantial minority.

07:35.835 --> 07:40.335
And so, for example, putting a,

07:40.405 --> 07:43.855
eliminating the goal fund, helped,

07:44.375 --> 07:46.535
employees on average, and we did an analysis

07:46.535 --> 07:49.735
that they've been made much better off, on average.

07:50.355 --> 07:52.895
And even though it may have hurt a few employees,

07:52.895 --> 07:55.895
keeping them from doing modest diversification,

07:56.345 --> 07:58.335
those diversification benefits can

07:58.335 --> 07:59.775
be achieved in other ways.

07:59.955 --> 08:02.895
And at any rate, the benefits are far greater.

08:03.125 --> 08:05.095
It's not a substantial cost of the loss.

08:05.555 --> 08:10.135
You can do even better with guardrails, which, are,

08:10.235 --> 08:11.455
are even more targeted.

08:12.115 --> 08:16.535
Uh, in our analysis, we could, we suggested

08:16.535 --> 08:19.255
that there could be a, a set of guardrails

08:19.645 --> 08:23.895
that would only impact about 10% of the,

08:24.375 --> 08:28.895
employees leaving 90% completely un unimpacted.

08:29.075 --> 08:30.855
Uh, so they could do whatever, continue

08:30.855 --> 08:31.895
to do what they were doing.

08:32.675 --> 08:36.895
And, and that would be a way to substantially, protect,

08:37.395 --> 08:42.255
people on average without hurting a small minority.

08:42.495 --> 08:46.975
Streamlining can eliminate al, allocation errors

08:46.995 --> 08:51.585
by just taking, unreasonable,

08:51.585 --> 08:53.625
investment options off the table.

08:53.635 --> 08:56.125
Those dominated investments that I mentioned

08:56.125 --> 08:59.885
before that can also streamlining can help by just stopping,

09:00.505 --> 09:03.645
participants, employees from overinvesting.

09:03.785 --> 09:06.925
Uh, the gold bugs can't go wild on a gold fund,

09:07.225 --> 09:11.685
or, what's coming very soon to retirement plans are,

09:12.225 --> 09:14.925
crypto ETF, options.

09:15.065 --> 09:18.845
And so there's, again, there's nothing necessarily wrong

09:18.845 --> 09:21.925
with trying to invest a little bit of your money in crypto.

09:22.585 --> 09:25.885
Uh, there might be moral issues involved

09:25.885 --> 09:28.645
with it since it's so much connected with illegal activity.

09:28.985 --> 09:31.885
But it, from an investment standpoint,

09:31.925 --> 09:35.085
crypto might provide some diversification benefits,

09:35.105 --> 09:38.005
but you definitely would want to,

09:38.345 --> 09:39.405
if you're gonna have it,

09:39.465 --> 09:41.165
you should put some guardrails on it.

09:41.165 --> 09:43.605
And so guardrails can also,

09:43.675 --> 09:45.565
play a role in just making sure you,

09:45.625 --> 09:48.045
you don't take an versified position,

09:48.105 --> 09:51.205
you don't make bets on too many high fee funds.

09:51.705 --> 09:54.645
Uh, one can also imagine having some guardrails

09:54.645 --> 09:58.605
that require you, to have some minimum, percentages

09:58.625 --> 10:00.765
so that there's a, it's a well known

10:00.995 --> 10:03.045
that there is an own country bias,

10:03.145 --> 10:05.705
and that often,

10:05.705 --> 10:09.705
investors don't put diversify internationally enough.

10:09.995 --> 10:13.945
There are three big allocation mistakes that people make.

10:14.405 --> 10:16.705
Uh, they fail to diversify.

10:17.245 --> 10:20.705
Uh, they fail to get low fee investment options,

10:21.285 --> 10:22.345
and they,

10:22.605 --> 10:27.185
and they can fail to, have the age appropriate exposure

10:27.245 --> 10:28.385
to the stock market.

10:28.575 --> 10:32.425
It's more reasonable for young people to have more,

10:32.535 --> 10:36.585
take on more stock market systemic risk,

10:36.645 --> 10:39.865
but less reasonable for older people,

10:39.865 --> 10:41.265
older employees to do that.

10:41.885 --> 10:46.545
And, and so, one of the great values

10:46.765 --> 10:51.425
of streamlining of, guard railing is

10:51.425 --> 10:55.265
that it can, help to encourage more people

10:55.325 --> 10:59.905
to move back toward default investment options, such

11:00.005 --> 11:04.665
as lifecycle funds, which can, can achieve,

11:04.925 --> 11:06.745
can avoid all three of these problems.

11:06.745 --> 11:08.825
They will automatically diversify you.

11:08.825 --> 11:12.505
They will automatically ramp you down, away from stocks

11:12.505 --> 11:14.105
and toward bonds as you age.

11:14.765 --> 11:18.705
And if it's the right kind of lifecycle target date fund,

11:18.885 --> 11:21.665
it, it can, make sure that you're not paying,

11:22.165 --> 11:23.385
too many fees.

11:24.125 --> 11:28.305
The, and the final, big problem that people have

11:29.045 --> 11:31.705
is, in just not saving enough.

11:32.125 --> 11:33.825
Uh, so there's,

11:33.925 --> 11:37.985
and so trying to find out ways, to encourage people,

11:38.605 --> 11:39.745
to save more.

11:40.085 --> 11:43.745
One thing that we discuss at the end of the book, we

11:44.705 --> 11:48.675
recommend that, people be able

11:48.695 --> 11:52.795
to buy supplemental social security benefits,

11:52.955 --> 11:56.285
That if you pay an actuarily fair amount,

11:56.635 --> 11:58.685
that you might be able to,

11:58.685 --> 12:00.925
double your social security benefits.

12:01.425 --> 12:06.325
And that we, we suggest that by default employees,

12:06.705 --> 12:11.125
increase their social security withholdings, so

12:11.125 --> 12:15.365
that, they would have more by default be purchasing more

12:15.365 --> 12:16.365
of these benefits.

12:16.745 --> 12:17.925
Now it's just a default,

12:17.945 --> 12:21.365
and that if people feel the urge to consume as much

12:21.365 --> 12:24.165
as they can, now they could, opt out of it

12:24.165 --> 12:25.685
and go back to the current system.

12:26.105 --> 12:29.525
But we've, we've tried to use a, a system of nudges

12:29.625 --> 12:31.485
and defaults, to try

12:31.485 --> 12:33.965
to also propose some ways to increase savings.

12:34.545 --> 12:39.125
The central legal implications is that,

12:39.155 --> 12:43.085
fiduciaries should first become more informed about

12:43.345 --> 12:47.885
how their, employees, how their beneficiaries

12:48.745 --> 12:52.325
are, investing, allocating their savings.

12:52.655 --> 12:56.605
There are, if they do that analysis, we've analyzed,

12:56.785 --> 12:58.405
not just University of Virginia,

12:58.585 --> 13:02.005
but we describe several other academic studies

13:02.505 --> 13:07.165
and almost all retirement plans, you will discover

13:07.705 --> 13:12.285
10 to 20% of your employees are making substantial,

13:12.705 --> 13:14.365
allocation mistakes.

13:14.825 --> 13:17.525
And once you find this information,

13:17.595 --> 13:21.645
then fiduciary should have a duty to redesign their, their,

13:21.825 --> 13:26.605
menus to, to try to reduce those mistakes.

13:26.825 --> 13:28.085
And streamlining

13:28.185 --> 13:32.445
and guard railing are two, viable ways

13:32.985 --> 13:36.485
to help employees make better investment decisions.

00:00 - The book, began ha with two, basic concerns. One is my discovery with my co-author Quinn Curtis, that, 401k plans often, include investment options, that no one should invest in, that they are dominated by other options on the menu.

00:24 - And, and so we found that a substantial number of plans offer these dominated, ripoff funds, if you will, and that a substantial amount of money, ends up in these funds. So first of all, that's, that seemed to me like a clear, problem. It's like having a, a car, that is designed with a button on it that no one should ever push. if you put a button on a

00:52 - car, someone's gonna push it. If you put a, an, a menu offering, someone's gonna order it. And so that was the, the first motivation for the book. The second one, grew out of some, consulting work that I did as an expert witness, and I discovered that there was a basic, problem, failure, of fiduciaries to learn about whether, individual employees were making, substantial allocation mistakes.

01:27 - so there's both the problem that the menus are, have bad offerings. But then secondly, I just was shocked that, these fiduciaries never learn, whether, employees are failing to diversify or investing in high, fee funds. and that's something that is easy for them to learn, and they just fail to learn. Employers have, a fiduciary duty, to act prudently, in their design

02:04 - of the 401k menu. And so it's imp prudent to put in an option that no one should invest in. And it's impudent, not to pay attention, to how employees misallocate their savings, because learning that can also feed back to their duty on how they design, the menu so as to protect them. if, if you find that too many people are over invested in an exotic fund, you can streamline your plan and take that fund out of your menu.

02:42 - Quinn Curtis and I, we're able to analyze, the University of Virginia's retirement plan, which is, as an aside, Quinn and I are both members in that plan. I was a visiting professor there and started to invest, And Quinn is a, a tenured member of the law school faculty. At any rate, in analyzing this plan, we found several funds where, employees were over invested, sacrificing huge amounts of, of diversification, benefits.

03:20 - the, in some ways the, a powerful motivating example is that, for years, Virginia offered a gold fund. And of the people who, invested in gold, a substantial proportion of them put virtually all of their retirement savings in this one gold fund. And going back to this procedural failures, the fiduciaries of Vir, of the Virginia Plan never would know this because they're, they're, they're given lots of information every quarter,

03:55 - but not on how individual participants, invest their money. And it, and it wasn't just the gold fund. There were other employees that put all their money into a biotech fund. And, there's nothing wrong with, investing some of your money in gold, some of your retirement savings and biotech that can help you diversify. You could even be a little bit overweighted, but you should, it's no reasonable fiduciary would ever,

04:22 - invest, all or, a substantial majority of savings in gold. That's just not a great way to invest, for the long term. And, and this motivating example in our analysis of the Virginia Plan suggests two different things fiduciaries can do is they can drop the gold fund, which is what, university of Virginia did that helped people.

04:51 - But there's another strategy, which Quinn and I call Guard railing. It's, also the motive for the title retirement guardrails, where you put a tap on the maximum amount of your savings that you could, invest in a particular fund. And so there's one might reasonably put a guardrail of 10%, on the gold fund. So in, instead of eliminating it so that people don't have the opportunity to diversify

05:22 - with gold at all, you could allow the keep the fund in. but, but put a cap on what it is, on how much they can invest. this guard railing is something that's not completely new. It's, we've had it, for years with regard to corporate stock. So not universities, but private companies, often used to, offer their own stock as one of the retirement plan options.

05:52 - And this is, in the old days, caused a huge, losses. so Enron, when it went belly up, a lot of its employees lost virtually all of their retirement savings. And in response to the Enron collapse and other similar stories, now, a majority of companies that offer company stock as one of the investment options, put a cap on it, a guardrail that limits the, the proportion of your savings

06:24 - that you can put in an versified offering. It is an under analyzed, aspect of fiduciary law. it's often the case that, that if you choose to, for example, drop, the gold fund, that, you are, helping, all the substantial group of e employees that were over invested in gold. But there you're also stopping, some of those investors that had more reasonable, that were only putting 5% in, let's say.

07:01 - And so, how, when is it useful to make a change that is going to help some, employees, but hurt others? And, we, support an idea. The fancy name for it is enhanced Kaldor Hicks, where you, make changes if you have confidence that they will help your employees on average without out, substantially, hurting a substantial minority. And so, for example, putting a,

07:40 - eliminating the goal fund, helped, employees on average, and we did an analysis that they've been made much better off, on average. And even though it may have hurt a few employees, keeping them from doing modest diversification, those diversification benefits can be achieved in other ways. And at any rate, the benefits are far greater. It's not a substantial cost of the loss. You can do even better with guardrails, which, are,

08:10 - are even more targeted. in our analysis, we could, we suggested that there could be a, a set of guardrails that would only impact about 10% of the, employees leaving 90% completely un unimpacted. so they could do whatever, continue to do what they were doing. And, and that would be a way to substantially, protect, people on average without hurting a small minority. Streamlining can eliminate al, allocation errors

08:46 - by just taking, unreasonable, investment options off the table. Those dominated investments that I mentioned before that can also streamlining can help by just stopping, participants, employees from overinvesting. the gold bugs can't go wild on a gold fund, or, what's coming very soon to retirement plans are, crypto ETF, options. And so there's, again, there's nothing necessarily wrong with trying to invest a little bit of your money in crypto.

09:22 - there might be moral issues involved with it since it's so much connected with illegal activity. But it, from an investment standpoint, crypto might provide some diversification benefits, but you definitely would want to, if you're gonna have it, you should put some guardrails on it. And so guardrails can also, play a role in just making sure you, you don't take an versified position,

09:48 - you don't make bets on too many high fee funds. one can also imagine having some guardrails that require you, to have some minimum, percentages so that there's a, it's a well known that there is an own country bias, and that often, investors don't put diversify internationally enough. There are three big allocation mistakes that people make. they fail to diversify. they fail to get low fee investment options,

10:21 - and they, and they can fail to, have the age appropriate exposure to the stock market. It's more reasonable for young people to have more, take on more stock market systemic risk, but less reasonable for older people, older employees to do that. And, and so, one of the great values of streamlining of, guard railing is that it can, help to encourage more people

10:55 - to move back toward default investment options, such as lifecycle funds, which can, can achieve, can avoid all three of these problems. They will automatically diversify you. They will automatically ramp you down, away from stocks and toward bonds as you age. And if it's the right kind of lifecycle target date fund, it, it can, make sure that you're not paying, too many fees. The, and the final, big problem that people have

11:29 - is, in just not saving enough. so there's, and so trying to find out ways, to encourage people, to save more. One thing that we discuss at the end of the book, we recommend that, people be able to buy supplemental social security benefits, That if you pay an actuarily fair amount, that you might be able to, double your social security benefits.

12:01 - And that we, we suggest that by default employees, increase their social security withholdings, so that, they would have more by default be purchasing more of these benefits. Now it's just a default, and that if people feel the urge to consume as much as they can, now they could, opt out of it and go back to the current system. But we've, we've tried to use a, a system of nudges and defaults, to try

12:31 - to also propose some ways to increase savings. The central legal implications is that, fiduciaries should first become more informed about how their, employees, how their beneficiaries are, investing, allocating their savings. There are, if they do that analysis, we've analyzed, not just University of Virginia, but we describe several other academic studies and almost all retirement plans, you will discover 10 to 20% of your employees are making substantial,

13:12 - allocation mistakes. And once you find this information, then fiduciary should have a duty to redesign their, their, menus to, to try to reduce those mistakes. And streamlining and guard railing are two, viable ways to help employees make better investment decisions.

Faculti AI can make mistakes