Addressing the Retirement Crisis with Shadow 401(k)s

Source: Deepa Das Acevedo, University of Pennsylvania Law School, Institute for Law & Economics Research Paper No. 16-21, September 5, 2016

From the abstract:
Most Americans will lack the financial resources to be secure and relatively satisfied upon retirement, and commentators increasingly recognize that this “retirement crisis” calls for policy changes affecting both active participants in the workforce and retirees. Nevertheless, some proposed reforms are limited by their exclusion of whole categories of workers or by their privatization of the problem and their reliance on employers’ initiative and skill. Other proposals have not gained much ground, perhaps because they incorporate forms of government contribution or liability that face uphill legislative battles in today’s political climate.

This Essay sketches a solution, the “Shadow 401(k),” that avoids these issues by creating a universally available and federally administered (but not guaranteed, matched, or credited) portable 401(k) plan and annuity purchase. The Shadow 401(k) builds on existing knowledge in behavioral economics, financial literacy, and gerontology to provide choice without requiring complicated planning. It also responds to recent calls for “portable benefits” plans that are designed with platform economy workers in mind. Consequently, the Shadow 401(k) presents an incremental step towards addressing the retirement crisis while also providing a flexible framework for future policy reform.