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Should we force people to save?

By Jennie L. Phipps ·
Thursday, August 28, 2014
Posted: 11 am ET

If you don't take care of yourself or save for retirement, should the rest of us bail you out?

A recent study raised that question by looking at people's apparent built-in inclination or disinclination to plan for the future.

The study, which followed workers from a single company for two years, found that people who were saving for retirement were much more likely to be proactive about their health, while those who weren't saving were often the same people who ignored troubling health issues that were likely to get worse because they were being ignored.

© Science Picture Co./Corbis

© Science Picture Co./Corbis

Co-author Lamar Pierce, associate professor at the Olin Business School at Washington University in St. Louis, says researchers examined the 401(k) contributions of about 200 employees of a laundry equipment company and then took stock of each worker's health, including a blood test, cholesterol screen, kidney and iron levels, how often they exercised and whether they smoked. Some 98 percent of them had at least one abnormal blood test, and 25 percent had at least one severely abnormal finding.

All workers were told about their health screen results and were given suggestions for improvement. The results were also sent to their personal physicians. Over the course of the next two years, each worker was retested, some more than once. Pierce says employees who contributed to their 401(k)s were 27 percent more likely to also show improvement in their abnormal blood-test results and other health behaviors than those who didn't contribute.

"If you give everybody the same information about their health or their well being in retirement, some people will do something about it and some people won't," Pierce says.

He calls it a "time-discounting" issue. "People have very different perceptions of time," he says. And that translates into different ways of looking at the need to take care of your health now before you get sick later or the necessity of saving now for a later retirement rather than spending everything you earn. "Some people care a lot more about buying things now than they do about buying things in the future," he says.

Education doesn't solve the problem

Pierce points out that in this study, most of the workers earned about $39,000 annually -- significantly above minimum wage -- so while the study didn't investigate if people were too strapped to save, there was no evidence that poverty was a factor in their health care or retirement planning decisions. Other research about this topic, Pierce says in the study,  suggests that a person's inclination to behave one way or the other is very difficult to change and providing them with information -- as this study did -- probably won't make much difference in their behavior.

"A reasonable hypothesis is that you could solve this problem with information, but there are people who, no matter how much information you give them, aren't going to choose to do anything differently," he says.

One conclusion that you might draw from this study, he believes, is that we all have a vested interest in ensuring that most people do what is good for them from a health and retirement savings standpoint because if they don't -- and we don't want them to go without -- we'll all have to pay the price down the road when they need and can't pay for basic living expenses or sophisticated health care.

"If we don’t like the idea of people starving to death in their old age or dying because they can't afford expensive health care  -- if these are our human values -- then we have to realize that a sizable portion of the population will end up that way unless there is something like Social Security that requires them to make a contribution," Pierce says.

"A lot of people aren't going to make the choices on their own that are going to result in good outcomes later in life, and what that means is the public has a strong interest in ensuring that we have some sort of control over how and what we are going to pay to care for them."

Here are some tips for staying motivated to save.

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December 30, 2014 at 8:59 am

We DO force people to save. It's called social security.

August 30, 2014 at 2:38 pm

So what happens to the people who didn't / couldn't save enough and who aren't able to work until the day they die...? It seems to me that the existence of large numbers of destitute, sick individuals for whom no care is available affects the quality of life for the rest of us (who did/could prepare for our future). With no support systems, the "have nots" will quickly outnumber the "haves," to the detriment of us ALL.

August 30, 2014 at 12:35 pm

I do not believe in forcing people to save nor do I believe in forcing others to bail people out. I do believe people are responsible for their decisions and the consequences of those decisions. Let's start teaching responsibility and eliminating Government hand out programs fraught with fraud.

August 30, 2014 at 9:21 am

How can you force someone to save, when the low wages paid are not enough to even cover basic needs like shelter and food? Corporations have cut wages, reduced benefits to the point that even basic survival is a full time job in itself.

August 29, 2014 at 5:30 pm

Here is an idea, if someone didn't prepare for the future don't let them retire. I think you should have a certain base amount in your 401K before you are allowed to retire. You can't force people to save for retirement. On the other hand, you can't force people to pay for those that didn't save.

Frank Wright
August 29, 2014 at 4:17 pm

The government already forces Americans to save 12.4% of their wage through the Social Security program and sucks at least another 2.9% in through Medicare. These miserable programs are taxes and Ponzi schemes but heck, they are government run. You can't expect those programs to succeed.

August 29, 2014 at 2:24 pm

I am sorry I didn't work hard and save , just to give it away to someone who could care less. If you don't want to be able to take care of yourself in retirement, that is your choice. I shouldn't be penalized because I saved my money for my retirement.The Constitution doesn't provide for social programs, it was never intended that the government would provide for the people.
If the country keeps going the way it is , I might as well quit working and join the leeches. Then what do you think will happen? The money will dry up and everyone will suffer.
Millionaires are already leaving the USA for other countries with a better tax structure.

Steve Vinzinski
August 29, 2014 at 2:06 pm

Bob has very good points.We are to an certain extent mandated to do many things.If you are self employed you pay for yourself double plus an surcharge at the end of the year.You match your employees and pay for workers compensation for them.Match medicare and pay in double for yourself.Pay all the unemployment insurance in New Jersey and match State Disability.If you have an pension you must provide for your employees,on and on.I will note I have no problem with that.I feel if the employer has to see that the employee saves and % of his paycheck and watches his diet how do you have time to run your business.Thus the employees would have no work.There are already have to many mandates.

Zane Wooten
August 29, 2014 at 2:03 pm

I think the exact opposite. Safety net programs are one of the functions of government . Let my vote counteract someone that doesnt give a flying flip about anyone else. Yes Amerika , where we have the right to discriminate against our fellow citizens, leave homeless to die in the street, make healthcare available to the highest bidder . then send immigrant kids home to intolerable conditions to suffer or to die.

August 29, 2014 at 1:21 pm

I do not believe forcing people to do something is a solution. Civilization will continue to function without. Russia and China are good to do that, people that believe people should be forced should go immigrate there instead. Let's keep the little freedom we have left in USA before it is all gone.

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