Far be it from me to argue with behavioral economist, Richard Thaler (Nudge was awesome, bro) but 401(k) re-enrollment is only good for the sponsors of such plans like T. Rowe Price ($TROW). The WSJ is reporting this morning on a growing trend for employers to choose something called "re-enrollment" for their employees' retirement plans. It goes like this:
Employees have the options of sticking with their current investment selection, if it's still offered, or choosing another mix. But in a re-enrollment, unless the participant specifically opts out, his or her 401(k) will be re-allocated to the company's chosen default investment.Thaler was concerned that employees don't have enough time/brainspace to make better decisions so it sounds like he likes this approach
"Many [participants] never change their asset allocation or contributions over their working lifetime, meaning that their asset allocation as they get older can be quite different than the one they intended," says Richard Thaler, professor of economics at the University of Chicago Booth School of BusinessListen, I'm all for nudging children towards better eating habits by the strategic placement and display of such foods in school cafeterias but forcing employees to a made-up allocation for exposure to the stock market...well, not only is that paternalistic, that's just bad investing.