Save More Tomorrow – a SMarT Plan?

Under the Save More Tomorrow (SMarT) plan, employees agree to commit a portion of each annual raise towards their savings. This program has been shown to have success with the majority of participants in initial trials – 80% of participants remained in the program for at least four years, increasing their average savings rate from 3.5% to 13.6% over 40 months. The average employee is likely to participate, because people are more inclined to give something up in the future, that they do not have at the present moment, than they are to give something up now. Further, almost everyone understands on some level that savings are a good thing, and thus will agree to save more if it comes at a lower cost to their present happiness. The only hesitation I would have about such a program is that such a program should not be issued as an opt out, but rather an opt-in program. A more philosophical debate about whether an individual is capable of making the best choices for themselves may be in order, but I believe that the best way to help someone is merely to offer, not to force, help onto them. If the SMarT plan can be implemented nationwide as an opt-in savings vehicle, it can be part of an effective program to increase the savings rate of low-savings households and reduce the wealth gap between the rich and poor.


(1) Benartzi, Schlomo, Richard H. Thaler. Save More Tomorrow: Using Behavioral Economics to Increase Employee Saving. Journal of Political Economy, Vol. 112, No. 1, pp. S164-S187, February 2004.

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