401ks weren’t a “mistake” they were designed to give wallstreet traders more money and for that task they have succeeded extremely well.
e: To the tune of $7trillion according to the article.
How do you think pension plans make money? They are managed by fiduciaries responsible for investing. Guess where they invest. 20% of the stock market is owned by pension funds :https://retiregenz.com/what-percentage-of-the-stock-market-is-owned-by-pension-funds/
So my employer did this thing where new hires automatically got enrolled in a 401k. If you did absolutely nothing to your 401k, each year it would automatically up your percentage to a max of Y. Is that common or uncommon? And in this world of 401k over pension, should that be more of a norm to help protect people that don’t know better build retirement savings. It doesn’t solve the problem of folks not having enough money and needing to use 401k for emergency funds…
It’s getting more common; which I think is a good thing.
It’s common among good employers, but unfortunately a lot of companies don’t do it. We should be encouraging more of this because people tend to suck at preparing for retirement.
And while it doesn’t solve the emergency fund issue, people tend to adjust their spending based on how much lands in their account. This is called the hedonic treadmill, where people adjust they lifestyle to fit their means on the way up, but they struggle to adjust it back down. Automatically increasing investments just reduces the impact of a raise, it doesn’t actually reduce your actually income since it just pulls 1% out of your normal raise (probably 3%).
The proper solution is for people to learn to properly budget and cut out things that don’t provide enough value, but that’s a much harder problem to solve than automatically increasing investments.
