Contents

Cover

TitlePage

Copyright

Dedication

Foreword:AlisonCookeMintzer

Acknowledgments

Introduction

Chapter1:RetirementReadiness:TheSuperSaversandtheIll-Prepared

AComfortableRetirementIntroducingtheSuperSavers

Chapter2:ABriefHistoryofRetirementTheRiseofRetirementPoliticsandthePensionMarketingtheSeniorCitizenWhereistheVision?

Chapter3:StateoftheUnionPersonalizingSuccessTheHallmarkofaCivilizedSociety

TheCurrentCommandCenterAdvisorsandLawyers

Chapter4:RiseoftheDCPlanDefinedBenefitPlansHowUnderfundingHappensTheDefinedBenefitMythTheRiseofDefinedContributionPlansChangedResponsibilitiesLongevityTheEvolutionof401(k)

Chapter5:FinancialLiteracyDefiningFinancialLiteracyMakingSavingStick

Chapter6:LessonsLearned,ChangingOutcomesDisruptingThinkingCampaignRoleModelsThePowerofBeliefs

Chapter7:ThePowerofContextTheContextofLitteringRetirementIndustrySuccessMetricsAutomaticPlanFeaturesThePowerofAuto-EscalationQualifiedDefaultInvestmentAlternativeLeakageLongevity

Chapter8:BeliefsandResolveTheIssueofStakeholderResolveIndividualResolvePlanSponsorResolveIndustryResolveGovernmentResolveWhat,Then,IsOurMessage?

Chapter9:TellmeaStoryFactsaren'tEverythingHowFlorenceNightingaleChangedtheMedicalProfessionBusinessandtheCreationMythCommunicatingValuesALessonforRetirementReadinessAStrawManCampaign

Chapter10:JointheDanceSomeHonestReflectionAVisionforWorkplaceSavingsUppingOurResolveTheDancingMan

Chapter11:LetterstoStakeholdersLettertoallAmericansLettertoPlanSponsorsLettertoPolicymakersLettertotheRetirementIndustry

Bibliography

Glossary

ListofContributors

Index

AbouttheAuthors

Coverimage:lassedesignenCoverdesign:KayleeConradCoverartdirection:DougCarterCopyright©2013byStigNyboandLizAlexander,Ph.D.All

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Transformtomorrow:awakeningthesupersaverinpursuitofretirementreadiness/StigNybowithLizAlexander,Ph.D.

pagescmIncludesbibliographicalreferencesandindex.

ISBN978-1-118-53736-7(hbk.:alk.paper);ISBN978-1-118-57463-8(ebk);ISBN978-1-118-57282-5(ebk);ISBN978-1-118-57274-0(ebk)1.Retirement—UnitedStates.2.Retirementincome—UnitedStates—Planning.I.Alexander,

Liz.II.Title.HQ1063.2.U6N932013306.3′80973—dc23

2012041907

Thisbookisdedicatedtomyfather,GregoryPeterNybo,whopassedawayduringthefinaleditingofthisbook.Notonlywasheacaringfatherandawiseman,hewasawriter,ateacher,andwasthecatalystforthisbook.Thanksdad;

-)wemissyou!

ForewordWeoftenhear,anduse,thephrase“retirewithdignity.”AccordingtotheOxfordEnglishdictionary,dignitymeans“thequalityorstateofbeingworthy,honored,oresteemed.”Ibelievethereforethattoretirewithdignityisdoingsowithmorethanjusttheminimumneededtogetby.Itisdoingsowithacertainlevelofself-respect,beingabletomaintainthenecessities,ataminimum,andhopefullyabletoaffordafewnicetiesaswell.Asafellowmemberoftheretirementindustry,onewhohasspentmuchofhis

careerlearningandunderstandingwhatis—andisnot—happeningintheworldof retirement savings, Stig Nybo believes the same thing. In these pages, hepresents a call to action to encourage all to help Americans secure theirretirement.Transform Tomorrow helps put clarity around the questions: whatexactlydowemeanbyadignifiedretirement,andhowarewehelping—andcanwehelp—Americansgetthere?Only by knowing where we have come from can wemove forward. These

pagesprovideacontextofhowour retirementplan,and401(k)system,got towhere it is today, and identify the misconceptions that Americans mustovercometounderstandhowbesttomoveforward.Forexample,whyis65thetraditionalretirementage,andwereAmericansso

much better off years ago with defined benefit (traditional pension) plans?Although I grew up seeing both of my grandfathers end their careers havingworkedforonecompanymostoftheirdecadesofemployment—providingthemwithfullpensions—thatactuallywasnottheexperienceofmany.Jobhoppingisnotanewphenomenon,andforallthetalkaboutthe“death”ofpensions,infact,Stig points out, coverage of Americans by retirement plans is actually morecommonnow.Andyetwearefacedwithadismalsavingsrate,longevityincreasesthatmight

lead topeople spendingmore time in retirement than theydidworking, and alackoffinancialeducationandliteracy.Where will this lack of savings get us? As one adviser to retirement plans

oftennotesinherpreretireeseminars,thereisalotmorecatfoodsoldinFloridathan there are cats to eat it.Now, that is a somewhat disturbing—andperhapshyperbolic—example, but it is true that a lack of savings canmean even the

mostbasicneedsarethreatened.Therefore, as Transform Tomorrow says, we need a national initiative to

change that. By recognizing this massive social issue and putting the rightcontextaroundit,Stighascreatedamessagenotjustfortheretirementindustry,butforthecountryasawhole.Withthecloseto10yearsIhavespentaffiliatedwithAssetInternational,the

publisher of PLANSPONSOR and PLANADVISER, publications focused onhelpingcompaniesandadvisersprovidethebestretirementprogramstheycantoemployees,Ifirmlybelievethatwhatwedomatters.HelpingcompaniesofferaretirementsavingsvehicletotheiremployeesisoftentheonlywayanAmericanwillbegintothinkaboutretirementsavings.However, as the years have gone on, I have been acutely aware that the

messagesthatwefocusonareallfornothingifwedon'tgetonemessageright—theneedtosave.Asanindustry,we'vespentalotoftimeandmoneytryingtomakeAmericans investors, insteadofmaking themsavers, and Ido think thatthoseofuswhoknowbettershouldbeabletohelpthosewhodon't.As I constantly reiterate tomembersofmystaff, Ibelieve this isoneof the

largestsocialandpublicpolicyissuesofourtime.Regardlessofwhatindustryyouworkinandwhatpositionyouhold,it isincumbentuponthoseofuswhoareawareofthisissuetogetbehindthissavingscampaigninitiativeanddowhateachofuscantoTransformTomorrow.

AlisonCookeMintzerGlobalEditor-in-Chief,PLANSPONSOR,PLANADVISER,PLANSPONSOREurope

AssetInternational,Inc.NewYork,NY

AcknowledgmentsWhenthingsgottoughanoldfriendofminewouldaskme,“Stig,howdoyoueatanelephant?”Andthen,beforeIcouldanswer,hewouldalwaysreplytohisownquestionwithasmile,“Onebiteatatime.”Thishasalwaysmadesensetome, and it is essentiallyhow thisbookwaswritten,onebite at a time.But astheysay,therealtruthoftenrunsalittledeeperandisfoundsomewherebelowthe surface. If asked that same question today, my answer would be a bitdifferent; itwouldsimplybe,“Notalone.”Why?Becauseinmy50years,I'veneveraccomplishedanythingworthwhilewithoutalotofhelpfromothers.Thisbookwasnoexception.WhileItakefullcreditforthedesiretowritethisbookandformybeliefthatit

was(andis)sorelyneeded,Ifullysharethecreditfortheknowledgewithinitscoverswiththosewhocontributedsofreelytoitscontents.Overthecourseofitswritingweconsultedwithmanyknowledgeableandpassionateindividualswhoopenedtheirheartsandmindstoourcauseasonlya401(k)Whisperer—atermthat will gain clarity as you read on—could. While their names are notmentionedhere,theyarelistedinthefinalpagesofthistext,alongwithashortlistoftheiraccomplishments.Iamtrulygratefulfortheircontribution,withoutwhichthisbookwouldnothavebeenwritten.But it doesn't only take knowledge to write a book, it takes a huge

commitment.Andwhilethecreditforthatcommitmentisoftenadornedontheauthor, it really belongs to all of those willing souls that get sucked into thevortex; and I'm not sure there's any other way to describe it. What's reallyperplexingishowutterlywillingtheyallwere(andare)todiginandnotforpay,buton theirown time,onweekendsandevenings. I've finallycome to realizethatit'sjustwhotheyareashumanbeings.Theybelievedeeply,asIdo,inthecause of retirement readiness and are willing to put their talents to work andsacrifice time and energy to make a difference. I am humbled by theirenthusiasm and their contribution, so please bearwithme as I paywhat littlerespectIcaninthesefewpages.I'vealwaysmaintainedthatittakesawholelotmoretalenttocreate,thanedit

(withnodisrespectintendedtomyeditors).ItiswiththisinmindthatIsincerelythankthosewhohelpedcontributetotheactualwritingofthisbook.ToPatriciaAdvaney,JulieQuinlan,andCharlieAvallone: itwastrulyanunfairrequest to

ask that you be clairvoyant enough to understandmy intent and direction andwritethecontentyouactuallydid,andthentobesubjecttotheviolentstrokesoftheeditingpenasthetonewasrefinedandcontentchanged.Iamtrulygratefulforyourtimeandtalent.While we've tried to tone down the technical content to the point of being

tolerable for all our readers, our topic simply cannot be done justice withoutaddressing some facts, figures, and technical jargon. A big thank-you goes toPatti Rowey and Catherine Collinson who provided research and technicalsupport; to Heidi Cho who wrote the glossary; and to Jolene Crittenden whowrotethebibliography.ToAlisonCookeMintzer,thankyouforyourthoughtfulwordsinourForeword.AndtoGregMiller-Breetz, thankyouforensuringwehadourlegali'sdottedandt'scrossed.To my proofreaders—Jonathan Anderson, Charlie Avallone, Catherine

Collinson,JeannedeCervens,JimDouglas,PatKendall,MonicaMitchell,JulieQuinlan andPattiRowey—your carefulwork is indeed appreciated.Butmoreimportantly,yourabilitytodeliverthemessagewithoutshootingthemessengerwill foreverbenoted.Asallofuswhohaveeverwrittencanattest, there is alittlebitofoursoul ineveryword,andI'vecometobelieve that red is justanabusivecolor(atleastasitrelatestoedits).Thankyouforyourkindbuthonestdelivery.ToAmyHaley—someonewhoyouwillallhavethepleasureofmeetinginthe

text of this book because of her willingness to share—thank you for openlysharingyourSuperSaverways.Youaretrulyaninspirationtoallofuswhohavesaved too little and a glimmer of hope that we can right this ship, if not forourselves, thenfor thosegenerationsyet tocome.AndtoMathewFrost, thankyouforbeinganinspirationtoourkidsandforbeingwillingtoshareyourstoryon how you are spreading financial literacy. Oh, and thank you for being ateachertobeginwith.ToKentCallahanandPeterKunkel, thankyoufromthebottomofmyheart

for lettingme runwith thisproject and for supporting it fromdayone.Thankyou toDaveShute andBarbaraMuir forbuying in early and stayingwithmethroughout theupsanddownsof thisarduousprocess,andtoJasonCraneandDebRubin,forsoeloquentlyputtingtheoryintopracticeaswetakeourmessagetotheworld.Youareverymuchapartofwhatwehavecreated.AveryspecialthankyougoestoJoleneCrittenden,whowasthequarterbackofthisendeavor.Jolene,youaresuchauniquetalentandhavetheabilitytohelpothersgetmoreout of themselves than they could ever possibly get without you. As with so

manythingsinmyworld,thiswouldn'thavehappenedwithoutyou.ToLizAlexander,myco-author,ithasbeenawildride,hasn'tit?I'dbelying

ifIsaidI'veenjoyedeveryminuteofthisjourney;attimesI'vewonderedwhattheheckIwasthinkingwhenItookiton.I'mprettysureI'verunthegambitofemotion, from elation to despair, and back again. But boy, has it been aworthwhileride!Youhavebeenprofessional, insightful, firm,challenging,andjustajoytoworkwith.WhatweproducedtogetherisfargreaterthananythingIcouldhaveproducedonmyown—ThankYou!Nowpleasedon't takeoffense,butI'msuregladit'sdone.Tomydad,Greg,andtoMargaret;tomymom,Tove;andtotheAustinclan:

mybrotherDagandhisfamily,Claudia,Mikael,Selvia,andClaudia;andtomyclose friends—thank you all for your support and enthusiasm. But moreimportantly, I'm sorry for being missing in action over the last year. Yourpatience withmy absence has been duly noted andmuch appreciated. And aspecialcallout tomycoachandbrother,Dag,whosimplysaid,“Whatareyouwaitingfor?Goaheadandwritethatbook!”Unbelievably,ithappened!Finally,tomyremarkablewifeHolly,andmytwopreciousboys,Andreasand

Torsten: Boy, do I owe you big!During a normal year, you guysmakemoresacrifices than Ihavea right toask for.But this lastyearwas trulyaboveandbeyondreasonableness.I'vemissedevents,games,andfamilyoutings,allinthename of this project. This extra duty came on top of an already rigorousschedule, andyouguyshavebeen thebalancing item—youare awesome!Mysincerehopeisthatthisbookwillbethecatalystforpeopletohaveadifferent,moreproductiveconversationaboutsavingforretirementandthatitwillmakeadifference to society. I also hope that it sets a small example that you can doanything you put your mind to. I love you with all my heart and alwaysrememberthesewordswe'vereadsomanytimes...“Andwillyousucceed?Yes!You will, indeed! (98 and 3/4 percent guaranteed.) KID, YOU'LL MOVEMOUNTAINS!”—Dr.Seuss.

IntroductionThe crying Indian campaign, premiering on Earth Day 1971, had it all: aheart-wrenching central figure, an appeal tomythic America, and a catchyslogan.

—OrionmagazinearticleOn January 1, 1969, President Richard M. Nixon took office as the newPresidentoftheUnitedStatesofAmericawithapromisetoachievepeacewithhonorandwithdrawahalfmillionU.S.troopsfromVietnam.Yettwoyearslater,theUnitedStateswasstillembroiledinwar.Atthattime,

protests were commonplace, with 350,000 veterans marching onWashington,DC and San Francisco, and 50,000 demonstrators setting up camp inWashington,DC'sAlgonquinPeaceCity.Thefreespeech,freelove,andpeacemovementwasinfullswingacrossthecountry.Iwasnineandgrowingupintheepicenterofcontroversy:Berkeley,California.Thatsameyear,theUN'sSecretaryGeneralUThantannouncedthatEarthDay

wouldbecomeanannualcelebration,wishingthat“...thereonlybepeacefulandcheerfulEarthDaystocomeforourbeautifulSpaceshipEarth,asitcontinuestospinandcircleinfrigidspacewithitswarmandfragilecargoofanimatelife.”The origins of Earth Day can be traced back to then-U.S. Senator Gaylord

Nelson,whohadpledgedtofocusonenvironmentalissuesinorderto,asheputit,“stemthetideofenvironmentaldisaster.”In a climate ripe for environmental activism, 1971 saw the use of DDT

outlawed by the U.S. Court of Appeals; Ralph Nader formed his Earth Actgroup;theUnitedStatesformallyceasedcommercialwhaling;andGreenpeacewasborninVancouver,Canada.Changewasintheair.Surprisingly,despitemyyoungage,itwasforme,too.

IronEyesCodyWeallhavememoriesthatforonereasonoranotherareindeliblyetchedintooursubconscious, typically only surfacing during brief periods of adult nostalgia.Theyareinvariablylinkedtoemotionallyimpactfulevents,liketheassassinationof JFKor theChallenger disaster.Although I didn't realize it at the time, one

suchmemorywasformedformeonEarthDay,1971.Truthfully, I don't remember much about that day; it was a long time ago.

Neverthelessthefollowingtwoeventsthatoccurred,neitheroneofthemovertlysensational,somehowbecameapermanentpartofwhoIam.Idon'trememberwhomIwaswith,whatcarIwasin,orevenwherewewere

going.Idon'tevenrememberbeingconsciouslyawareofwhatIwasseeingatthetime.Itwasn'tuntillaterthatthingsfellintoplace.WewereontheBayshoreFreewayintheSanFranciscoBayArea,andIwaslookingoutthewindow,mostlikelyinanefforttodistractmyselffromfeelingcarsick.Myeyesdriftedtothemudflatsofthebayandtookinthedebris.Half-buriedtiresstooduprightinthemudandtrashlitteredthewetlands.Irememberanoldrustingcarcassofacarsitting in the mud, at what seemed like a hundred yards from the shore, andwonderinghowitgotthere.Alargebirdwasperchedontheroof,aBlueHeron,whichiswhyIbelievethatthisimagestuckinmymemory.Lookingback,thestrange thingwas that this blight on an otherwise beautiful landscape seemedquitenormal.Later that evening, while my brother and I were watchingAlias Smith and

Jones on the family's black-and-white TV set, the network switched to theinevitable commercialbreak.A steady, almosthypnoticdrumbeat capturedmyattention.OnthescreenacanoecameintoviewwithaNativeAmericanmanonboard.ThecamerachangedperspectiveandtheIndian—havingpulledhiscanoeontoarockybeachstrewnwithdebris—wasnowstandingbythesideofabusyhighway, massive towers belching grey smoke in the background. The musicintensified as a bag of trash, thrown from a carwindow, exploded at his feet.Thenadeepvoicesaid,“Somepeoplehaveadeepabidingrespectforthebeautythat was once this country...and some people don't.” As the scene ended, thecamerazoomedinontheNativeAmerican'sfaceasasingletearrolleddownhischeek.Regardlessofwhenyouwereborn,youareprobablyfamiliarwiththeCrying

IndianPublicServiceAnnouncement (PSA),whichwenton tobecomeoneofthe top advertising campaigns of the twentieth century. The actor used in thecampaignwasknownasIronEyesCodyand,althoughborntoparentsoriginallyfromSicily,hehadplayedNativeAmericans inHollywood films foryears. In1995IronEyesCodywasevenhonoredbytheAmericanIndiancommunityforbringing attention to and helping to promote their cause. Forty years later, aYouTube search for “Crying Indian” nets multiple versions of the originalcommercialwithhitratesnumberinghundredsofthousandseach.Viewershave

rated this PSA: “The best commercial ever,” “Best PSA ever made,” and“Powerful.”AsoneoftheinitiativeslaunchedbythenonprofitorganizationKeepAmerica

Beautiful,whichhadbeenfoundedin1953,theIronEyesCodymediacampaignhad a profound impact on American beliefs, values, and behavior aroundlittering.Asyou'lldiscoverinalaterchapter,thankstothisandotherefforts,theoveralllittercounthasbeenreducedby61percentsince1969.There is no doubt in my mind that the emotionally charged, clear, and

immediatelyunderstoodmessagepromotedbytheCryingIndian,supportedbylegislationandcommunity action,helped to completely transformournationallandscape. Suddenly the trash I saw earlier that day, which was blighting theBayshore Freeway, took on a different meaning. Even as a child, I distinctlyremember feeling—as a consequence of seeing that TV commercial—thatlitteringwaswrongandweneededtodosomethingtochangethings.

RetirementReadinessOnthesurface, theissuesofsavingforretirementandenvironmentalpollutionmay appear to have little in common. Yet today there exists a similar sense,nascent perhaps but growing, that we need to do something about retirementreadiness andprovokepeople to savemore, in the sameway thatwechangedourperspectivesabouttheenvironmentandlittering.Whatsparkedthedesiretowritethisbookwasasimplebutprofoundquestion:

whatwillittaketoensureabroader,sustainablesenseofretirementreadinessinAmerica?Inordertoanswerthatquestion,wesoughttheperspectivesofawiderangeofexperts.Weinterviewedthematlengthtogathertheiropinionsonthecurrent workplace retirement savings system, financial literacy, our resolve totackle this problemhead on, andwhatmight be themessagewe could use torallyeveryonearoundthisissue,similartothewaytheCryingIndianhelpedtocleanuptheAmericanlandscape.This was never a question I felt capable of answering on my own, despite

havingworkedintheretirementservicesindustryforthepasttwodecades—firstas a financial advisor and more recently as President of Pension Sales andDistributionatTransamericaRetirementSolutions.NorisitaquestionIbelieveotherindustryprofessionals,orevenpolicymakers,shouldtrytoaddressontheirown.Evenifwefeelasifthesearethefieldsonwhichthebattleisbeingfought

rightnow,itmaynotbewherethewarwillbewonorevenwherethebestideaswillbefound.Someof the smartestorganizations—ranging from the InnoCentive initiative

backedbythelikesofBoozAllenHamilton,EliLilly,andProcter&GambletoGoogle'sSolveforX—areopeningupchallengestoseeminglyinsurmountableproblemstopeoplewithdifferentwaysofthinkinganddifferentskillsets.Why?Because,astheFounderoftheWorldInnovationInstitute,NaveenJain,

points out in a Forbes article subtitled “Why Non-Experts Are Better atDisruptive Innovation”: “I believe that the best ideas come from those notimmersedinthedetailsofaparticularfield.Experts,fartoooften,engageinakindofmyopicthinking.Thosewhoaredownintheweedsarelikelytomissthebigpicture.”Similarly,webelievetheproblemofretirementreadinesswilllikelybesolved

by existing and new sources of creativity, with people coming together touncovernewsolutionsandawayforward.Thoseofusinvolvedintheefforttodriveretirementreadiness(forexample,

industry professionals, policymakers, and employers who sponsor retirementplans),maybesufferingfromasimilarchallenge:wehavebeensoclosetothisissue for so long that we need to broaden our thinking in order to find truesolutions, possibly including how we define the concept we call retirement.Afterall,asyouwilldiscoverwhenweoutline thehistoryofretirement in theUnitedStatesinChapter2,therehasnevertrulybeenacohesivevisionaroundthe issue of retirement; this was apparent long before therewas a retirementservices industry.This is a societalproblemandweneed topull together as asocietytofixit!Freshmindsontheissueofretirementreadinessaredefinitelyrequired to help build the right kind of campaign that ensures everyone whowantstoorneedstocanenjoyaretirementthat'sfullyfunded.Ironically, there are plenty of national campaigns concernedwith promoting

healthandextendingourlives,likehealthyeating,endingobesity,andlearningtolookafterourhearts—butnothingfocusedonmakingsureweallhaveenoughmoney in order to enjoy living those extra years.Why is that, we wanted toknow?IfIronEyesCodycouldhelpchangeourculturearoundlittering,whydowenothaveasimilarcampaignaimedatensuringretirementreadinesstoday?TheCrying IndianPSAwasboth timelessandaproductof its time.Froma

timelessperspective (andweurgeyou towatch thecommercial first, ifyou'renotalreadyawareofit),thegeniuswasthatittouchedeveryoneindividuallyandcollectively. Even as a young boy, I felt the message that Iron Eyes Cody

conveyed, with that single tear, was being directed specifically at me. At thesame time, therewas a feelingof solidarity—of collective responsibility—thatalsoemanatedfromit.Thevillainsweresomehypothetical“them,”notus,eventhoughcollectivelywewerepollutingthelandscape.TheIronEyesCodyspotsachievedthatdelicatebalancebetweengalvanizingpeopletotakeactionwhileatthesametimenotpointingawaggingfingeratusforhavingcausedtheprobleminthefirstplace.(That'snottosaytherewasn'tplentyofcriticismaimedatthecampaign,butthat'sanissuewe'lladdresslaterinthisbook.)Asidefromitsmodernmythologicalquality—oftappingintouniversalhuman

emotions and values—the campaign was also very much of its time. Asmentionedearlier,therewasconsiderablesocialunrestandaspiritofrebellioninthe air; the countrywas experiencing a stagnating economy andAmericawasembroiled inahighlychargedwarwithnoobviousexit strategy.Theparallelsbetween then and now are quite striking. Simply swap the Occupation ofAlcatraz for Occupy Wall Street, Vietnam for Afghanistan or Iraq, andStagflationfortheGreatRecession!For any message to succeed, regardless of how powerfully it taps into our

emotions or how brilliantly it is executed, the environment needs to be right.Nineteen seventy-one was obviously the right time for the Crying Indiancampaignandwebelieve that2013andbeyond is ripe for launchinga similarmessagearoundretirementreadinessandfinancialsecurity.Fortyyearsagowebegantacklingtheblightoflitteringandpollutioninthis

country,andwhilethatisanongoingbattle,youjusthavetolookoutsideyourwindowandcomparethattomemoriessuchastheoneIdescribedearliertoseehowfarwe'vecome.Today,canweeffectthesameculturechangewithrespecttohowmuchandwhenwebegintoplanandsaveforretirement?Thisisnotjustabookbutaclarioncalltostartamovement,whosepurposeit

istoprovokeeveryone(bywhichwemeantheAmericanworker,policymakers,retirement services professionals, employers, and the media) to get behind acampaignthatwillfundamentallychangethewayweviewretirementreadiness.

MappingOuttheChaptersRatherthanattempttoprovidetherightanswers,wearedeliberatelysettingouttoaskwhatwebelievetobetherightquestions.Theconversation,initsbroadestsense, hasn't really heated up yet. After all, chances are that you haven't

participatedinthewayweareproposing!Inorder tohelpyoubetterunderstandandpotentially reframe this issue,we

openthefirstchapterbyaskingwhyhumanbeingsaren'tbetteratmakinglong-termdecisions.Ifweacceptthatweareallgettingolderandonedaywewillnolongerbewillingorabletowork,whyisitthatwedon'tplanearlierandbetterforourretirementyears?Ratherthanpaintthetypicaldoom-and-gloompicture,however,wealsowant

toidentifywhoisretirementready,andhighlightwhatonesurveyhasnamedtheSuperSavers—individualswho,foronereasonoranother,haveconfidentlysetenoughmoneyasidetoretireevenearlierthanthenorm.Wethencontrastthesewiththevastmajorityofpeopleinthiscountry,thosewhoareill-prepared.Onany journey, it isvital toplot twopoints:whereyouarenowandwhere

you are headed. In some cases, it is also helpful to review the direction fromwhichyouhavecome.Forthatreason,Chapter2takesabackwardlookatthehistoryof thisnotionwecall retirementand its economic,political, and socialimplications from the beginning of the nineteenth century through to theemergence ofwhat are called defined benefit plans.Not least,we outline thatone thing we have never had, not even today, is a cohesive vision for thiscountryaroundretirementreadiness,avisionthatbothinspiresandunitesus.InshapingChapter3,entitledStateoftheUnion,wewentbackintimeonce

more.Onthisoccasion,wejourneyedtoapointwhenthewholeofAmericawasindeedinspiredandunitedbehindacompellingvision—thatoftheNASAspaceprogram, as articulated by former President John F. Kennedy. This chapterreviewsthenear-catastrophethatwastheApollo13missionandasks:Whatkindofcommand-control teamdowehave inplacewith respect to ensuringa safetouchdownforcitizensduringtheirretirementyears?Andwhatkindofsysteminfrastructuresupportstheeffort?Ifyouweretoasktheaveragepersonaboutthepensionsystemandhowithas

evolved over the past 50 years, the storywould sound something like this: Itusedtobethatweworkedforonecompanyforourentirelivesandthenretiredwith a full pension; employees were loyal and employers paternalistic. InChapter 4, we address this misperception head-on as we investigate how themodernpensionhasevolved.We review the retirementplan systemaswell astherisksassociatedwithmanagingretirementplans(bothdefinedbenefitplansanddefinedcontributionplans)andhowthoseriskshavemorphedovertime.Afterillustratinghowtherisksassociatedwithretirementsavingsshiftedfrom

theemployerofferingadefinedbenefitplantotheindividual,whoseretirement

savings now rests largely with a defined contribution plan, we also ask howprepared is the American worker for this newfound responsibility, given thecurrentstateoffinancialliteracyintheUnitedStates?Chapter5focusesontheextent to which the average American is realistically equipped to make theinvestment decisions they are now being called upon tomakewith respect totheir workplace savings plans. It asks: what does it mean to be “financiallyliterate”?Having outlined themain issues that got uswherewe are today,we change

direction inChapter 6 to look atwhatwe can learn from a number of highlysuccessfulbehaviorchangeadvertisingcampaigns,onesthatmighthelpinformhow a nationally supported retirement readiness campaign could be designed.Specifically, we identify two behavior change concepts that fall along acontinuum:withcontextononeendandbeliefsontheother.Chapter 7 further explores the first of those concepts—context. It identifies

thatwhilethisdoesindeeddriveresultsintermsofchangingpeoples'behavior(suchashowmoreeasilyaccessibletrashcanshelpreducelittering),withoutaclearvisionguidingus,theresultswegetarenotnecessarilytheoneswewant.In Chapter 8we tackle the other side of this equation—beliefs and resolve.

Whenitcomestoourself-efficacybeliefsaroundretirement(meaningtheextenttowhichwebelievewearepersonallycapableofadoptingnewbehaviors,suchas saving earlier and deferring more money into plans), do Americans reallyhavewhat it takes tomake this change?Or, aswe heard over and over frommanyofourinterviewees,arewemoreofaspendingculturethatbelievesthatifour consumerism were to take a back seat to savings, then we woulddetrimentally impact the U.S. economy? This chapter looks at our resolve tofundamentally shift course on the issue of retirement readiness from theperspectivesoftheindividualAmericanworker,plansponsors(employers),theretirementservicesindustry,andpolicymakers.If we were to assume that every one of these stakeholders resolved to get

behindaunifyingmessage,whatmightthatcampaignlooklike?Inordertohelpinformthecreationofastrawmancampaign,inChapter9weinvestigatewhatittakes to craft a compelling, “sticky” message using age-old storytellingtechniques.Howwasit,forexample,thatFlorenceNightingalesingle-handedlytransformed themedicalprofession?Whydo the“founded inagarage”mythsaboundinhigh-techstart-ups?AndwhathelpedtwoformercollegesweetheartstransformUglydollfromaprivategesturetoaworldwidetoyphenomenon?

TheFinalQuestion...ForNowDespitethebesteffortsoftheretirementservicesindustry,theaverageAmericanisstillnotsavingenoughtoretirecomfortably.Whatwebelieveisneededisanationallyrecognized,coordinatedretirementreadinesscampaignalongthelinesof successful Public ServiceAnnouncements—like IronEyesCody andRosietheRiveter—thatwill help to change behavior and reshape the culture of ournation.Thisbookbeganasaninitialcalltoactionforsuchacampaignandwecouldhave left it there.Butwedidn't. InChapter10weoffer an invitation toparticipate inacoalitionof stakeholdersaroundaphilosophyof“Yes, and...?”Plus,wearemakingsignificantinvestmentsoftimeandmoneyinfundingawebpresence, asa first step towardattracting thosecreative thinkerswhocanhelpdesign a straw man campaign, as part of the movement to change the wayAmericasaves.Whether you are an actual (or would-be) retirement plan participant, an

employerwithacurrent retirementplanor intention to initiateone,a financialadvisororothermemberoftheretirementservicescommunity,orapolicymaker—thereisanopenletteratthecloseofthisbookwithyournameonit!Eachofthesemessages outlines the key responsibilitieswe feel you need to accept inordertocontributetotheoutcomeweareseekingtobringabout.Ouraimwiththeselettersistoprovokeandinspireyou.Weneedtowakeupandconsiderthedifferentwaysinwhichwecancommittotakingactionaroundagoalrelevanttotheconstituencytowhichwebelong.Butbeyondthat,tohelpbuildacoalitioninwhichallconstituenciescometogetherinordertomakerealprogressaroundthisissueofretirementreadiness.Wedesperatelyneedtodothat,becauseifwedonothingwewillfailnotjustourselvesbutourchildrenandfuturegenerations.Thereweremanythingstoldtousduringthecourseofinterviewingpeoplefor

thisbook thatwere impactfulandprofound.One thatespecially resonatedwasthis comment by Charlie Ruffel, President of Kudu Advisors and founder ofPLANSPONSOR®magazine,whosaid:At the end of the day, an absolute hallmark of a civilized society is forsomeonetobeable,afterdecadesofwork,toretirewithfinancialdignity.My question to you, then, as you read this book is: how do we make that

happen?

StigNybo

PortolaValley,CaliforniaSeptember2012

Chapter1

RetirementReadiness:TheSuperSaversandtheIll-Prepared

Neverdoubtthatasmallgroupofthoughtful,committedcitizenscanchangetheworld;indeed,it'stheonlythingthateverhas.

—MargaretMead,AmericananthropologistItisoneofthosequestionsthatpsychologistsandeconomistslove(andlive)tograpplewith:whydowesofrequentlyfailtoactinourlong-termbestinterests?For example, take a common situation at the organizational level. Findings

fromBurson-Marsteller's2011CrisisPreparednessstudyshowed thatwhile79percent of business decisionmakers believed theywere only 12months awayfromapotentialbusinesscrisis event, andwhile they recognized the risk suchevents posed to both revenues and reputation, just over half of the companiespolled (54 percent) admitted to having a crisis preparedness plan in place.Ofthosewhodid,two-thirdsagreedthatitwasprobablyinadequate.Atan individual level,wehavea similar situationwith respect to retirement

readiness.According toThe InvestmentCompany Institute (ICI), “the averagebalance of Americans' 401(k) accounts was just over $60,000 at the end of2010.”Thismeansthatasidefromtraditionalpensionplans(typicallyknownasdefined benefit (DB) plans, which only 19 percent of private sector workersparticipatein)andSocialSecurity(whichmanyAmericansexpectwillprovidelowerbenefitsinthefuture),theaverageAmericancurrentlyhas$60,000tolastthemthroughouttheirretirementyears.AccordingtoICI,“thislow401(k)planbalanceisalarming,”butitdoesn'ttakeanexperttocometothatconclusion.The good news is that when we narrow our view to specifically look at

individualswhoareintheir60sandareapproachingretirementandthenexpandour focus to include both IRAs and 401(k) balances, the picture changessubstantially. According to EBRI's 2010 integrated defined contribution/IRAdatabase, their combinedbalance at the endof2010 stoodat$275,517. In thespiritoffulldisclosure,theanalysiswaslimitedtoindividualswithboth401(k)

andIRAbalancesattheendof2010,butdoesdemonstratetheemergingsuccessof defined contribution (DC) plans.While this is significantly better than thepreviouslymentioned$60,000average401(k)balance,thereisstillconsiderableworktobedone.Just how much savings are enough for today's soon-to-be-retired Boomers

(individualsbornbetween1946and1964) is an issuewewill address shortly.Butthinkaboutitthisway.Lifeexpectancyhasincreasedbyalmost30yearsinthelastcenturyandifretirementageremainsinthemid-sixties,itcouldsoonbethecasethattoday'sMillennials(alsoknownastheEchoBoomers,GenerationY,orNetGeneration—thosepeoplebornbetween1980and2000)willneedtosaveenoughmoneytocoverthemforasmanyretirementyearsasthenumberofyearstheywereinemployment.Thelongertheytaketostartsaving,theharderitwillbeforthemtomakeupthatshortfall.Whoispromotingthatmessage?Thelevelofpersonalresponsibilityinvolvedinbeingpreparedtoretirewhen

youchoose,whetherthatmeansstoppingworkaltogether,workingpart-time,orperhapsventuringintolater-lifeentrepreneurialism,istakingitstimetoseepintoournationalconsciousness.GallagherRetirementService'sMikeDiCensotoldusthatjustfiveyearsago,

80percentofpeoplesurveyedsaidtheythoughttheyhadenoughmoneysavedfor retirement and expected tobe “very comfortable,”despite the fact that theaverage401(k)accountbalancestoodatthattimeatjust$67,000.Eveniftherehad been ironclad guarantees of high investment returns over the years thatfollowed,thatstillwouldhavelikelyproducedabalanceinsufficientforthemtoretire.Letus lookat theexampleofaparticipantwhohasaccumulatedasmuchas

$250,000 by the time they retire. Using conventional wisdom, a 4 percentwithdrawal rate has generally been accepted as the amount a retiree canwithdrawannuallyfromtheiraccountandstillhavemoneytolastthemthroughretirement. That means a balance of $250,000 nets a retiree approximately$10,000ayear,or$833amonth.Now,considertheindividualwithanaccountbalanceofjust$67,000.Usingthatsame4percentassumption,thatisanincomeof $2,680 a year, or $223 amonth. AsDiCenso pointed out, “At that time itwasn'tmakingsensetoushowsomanypeoplefeltthattheywouldbereadyforretirement.”Hiscommentsbecomeevenmorerelevantconsideringthepastfewyears of tumultuous stock market performance and the current state of lowinterestrates,whichbringeventhe4percentruleintoseriousquestion.

So, back to our opening question:Why don't intelligent, responsible humanbeingsconnecttheircurrentbehaviorwithfutureconsequences?YoucouldblamethisonthePaleomammalianhardwarethathasmanagedour

fightorflightresponsessincethedawnofhumankind.Specifically,thoseneuralstructuresknownas the amygdalae,whichDanielPink referred to inAWholeNewMind:WhyRight-BrainersWillRuletheFutureas“thebrain'sDepartmentofHomelandSecurity.”Intimesofheightenedthreattheselittlealmond-shapedregionsof thebrain (theword amygdalameans almond inGreek) areonhighalert,constantlyonthelookoutfordanger.Whenweareoverlybusy,mentallyprocessing all the emotions associatedwith challenges ranging frommountingcreditcarddebtandpossiblehomerepossessiontotheimplicationsoftheGreatRecessionandtheWaronTerror,thereisverylittlebandwidthlefttofocusonthe future and how we desire it to be different than the present. But thisavoidancebehaviorisnotnewandthefullexplanationforourlackofplanninglikelyrunsmuchdeeperthanourreactionstorecentevents.Joe Mrozek, Managing Director and Head of Middle Markets, Bank of

America Merrill Lynch, characterizes the challenge as a tortoise and harephenomenon. “There is no magic and nothing exciting about retirementplanning.Inreality,it'sjustaslowgrindthroughoutyourworkinglifetime.Themost successful people are the methodical savers that make a consistentcommitment to an investment program and stick with it through the ups anddowns.” When stated in these straightforward terms, could this be why it'sdifficulttoengagetheaveragepersontosaveforretirement?Nevertheless, some people are highly successful at focusing on the future.

LaterinthischapterwewillintroduceyoutoacohortofSuperSaversknownastheFutureEarlyRetirees,identifiedbytheTransamericaCenterforRetirementStudies®, a nonprofit, private foundation, as doing everything they can tomaintaintheirownpersonalvisionforabright,post-workingfuture.Manypeople'semotionalstates remain inoverdrive,however—not just from

fearandanxiety,butfromregretattheopportunitiestheyfeeltheyhavemissed.This is not just a U.S. phenomenon. For example, a recent

www.plansponsor.com article reported howCanadianBabyBoomers regrettedfailingtoplanearlierandbetterfortheirretirement.Forty-twopercentsaidtheywishedtheyhadstartedsavingatanearlierage;aquarterofpeoplepolledsaidthey regretted not making regular contributions and maximizing thecontributions theywereallowed tomake; slightly fewer (24percent) said theyshouldhavegivenmorethoughtto,andbudgetedmorefor,theirretirementyears

thantheydid.Over on our side of the border,weAmericans are grapplingwith plenty of

emotions of our own. The National Institute on Retirement Security (NIRS)study entitled Pensions and Retirement Security 2011: A Roadmap forPolicymakersreportedthehighlyanxiousstateofmostAmericans,84percentofwhom are concerned about the current economic conditions affecting theirabilitytoachieveasecureretirement.

AComfortableRetirementBut,whatdoesitmeantoberetirementready?Givenallthevariablesweneedtocompute—fromhowlongwearelikelyto

live,howhealthywewillbeduringour lateryears,andhowmuchhealthcarecostswilldrainthesavingswedohave—howdoweevenbegintogetahandleonhowmuchweneedtosave,evenifwehavethetimeanddisposableincometodoso?Afterall,wedon'tliveinaworldsuchastheonedepictedbythe1976movieLogan'sRun, inwhich the inhabitantshadaknownnumberofyears toliveandacrystalembeddedintheirhandsthatturnedblacktoindicatethattheirhumanshelf lifehadexpired! In reality,weneverknowwhenwearegoing todie,orwhatkindofhealthwecanexpecttoenjoy(ornot)duringourlateryears.Withall thevariables involved,howcananyoneexpect toplaneffectively forretirement?(Wewilllookattheissueoflongevityriskmorecloselylaterinthebook.)What kindof comfortable retirement arewe expecting in any case?Perhaps

bowed by the onslaught of recent financial crises that have given theBoomergeneration, especially, a major wake-up call, it appears that the averageAmerican today does not have unrealistically high expectations. While themarketingofretirementinthelate1950sandearly1960sstressedtheappealofforeign travel and otherwise glamorized these later years, as we outline inChapter 3, definitions of a financially secure retirement from the same NIRSstudycitedearlierincludedsuchpractical,day-to-dayconsiderationsas:

Maintainingahomeandnothavingtoworryaboutpayingforit.Havingadequatemedicalcareandcoverage.Beingabletopaybillsandaddressotherfamilyresponsibilities.

While theseare laudablypragmaticviews, theydon't account for twovitallyimportant aspects of retirement readiness. In addition to having the right

replacement ratio (the percentage of current income that you would need inretirement to maintain your current standard of living), you must also havesufficientknowledgeandresolvetomakethesavingsyoudohavelast.AsisevidencedbytheNIRSfindingscitedearlier, fewAmericansappear to

be thinking along the lines recommended by UBS Financial Services' PaulD'Aiutolo.Headvisesplanparticipantsnottoeventhinkaboutretiringuntiltheyhave no mortgage payment, no credit card debt, and no adult children orgrandchildren living under their care for whom they are responsible for big-ticket items like a college education. When they've significantly reduced oreradicatedthosedebts,saysD'Aiutolo,theycanmuchmorereasonablyexpecttocover theirexpenses inretirement.But(and it'sabigbut),asD'Aiutolopointsout, “Whatwe have as a country right now is very different than in the past.We're not only asking retirement plans to replace 80 percent of income,we'reasking them to replace income that is still needed to supportmortgages, adultchildren, credit cards and things that were never intended by the originalretirementsystem,becausewedidn'tevenhavecreditthentotheextentthatwedonow.”According toananalysisofdataprovidedby theBureauofLaborStatistics,

theaverageAmericancentenarian(apersonwholivestobe100yearsold)canexpecttospendaround$3.5millioninhisorherlifetime.Betweentheagesof50and81—whichis theaveragelifeexpectancyofmost50-year-oldstoday—wearelikelytorunupbillstotaling$1.4million.Ofcoursethisassumeslivingtoouraveragelifeexpectancy!Whatifweenduplivingtobe91,oreven100?AsCharles Passy commented inTheCost of Living Longer—Much Longer,

“Callitthenewdeathcalculus:thetwenty-firstcenturyequationfordetermininghuman longevity.Or call itmisguidedguesswork, as somecritics have.Eitherway, it's hard to imagine a math problem that has flummoxed humanity forlonger.(Actuaries,infact,havebeenfumblingforananswersince1583,whenthe first life insurancepolicywas issued.)And it's evenharder to conceiveofonewithmoreatstakeintheoutcome.”If living tobe100yearsoldsounds like itwillonlybeaproblemfora tiny

minority, consider this: theUnitedStates and Japan are the countrieswith thehighest percentages of centenarians. It has been estimated that in the UnitedStates alone, thenumberof 100-year-oldswill rise from the current 75,000 toover600,000bythemiddleofthecentury.Injustafewyears'time(2017tobeprecise)wewill celebratea remarkable first:morepeople in theUnitedStateswhoare65andoverthanchildrenyoungerthanfive.

Savingforatimewhenourabilitytoearnisdiminished,assumingwewanttocontinueworkingatall,coupledwithincreasingcostsofhealthcarethatcouldstretchfor20yearsormoreis,asLauraL.CarstensenpointedoutinRetirementinanEraofLongLife, “a tallorder.”According toone report,people in theireightiesspend57percentmoreonhealthinsurancethantheircounterpartswhoareintheirfifties(Marte2012).Whetherwearepreparedforitornot,that'spartoftherealityofbeingretirementreadyinthetwenty-firstcentury.Aswe have discovered, amongAmerica's current 1.9million nonagenarians

(peoplewholiveintotheir90s),theseindividualsrelyheavilyonSocialSecuritypaymentsandpensions.ConcernsabouttheabilityofSocialSecuritytomeetitsobligationsforfuturegenerationsarebeyondthescopeofthisbook.Whatisofdirect concern, however, is the number of Americans who, for one reason oranother,donotparticipateinanykindofretirementsavingsorpensionplans.Typically, lower-incomehouseholdsare less likely tosaveforretirement, for

reasons thatare likelyobvious.Theyarealsomore likely tohave“justgettingby” as their greatest financial priority. While Social Security, as it standscurrently, does replace a higher percentage of lifetime earnings for lower asopposed to higher-income earners, complete reliance onSocial Security is notappropriateforanyAmerican.Also,partofthisissueisthefactthatthenormsoflifecycleconsumptionmean

thatmostworkers do not begin to save for retirement until they arewell intotheirworkingcareers,theirprimaryfocusearlierbeingfundingtheireducation,buyinghomesandcars,andkeepingacertain levelofcashonhandtopayforemergencyneeds.For lower and middle-income earners, not having the money to save was

typically cited as the reason not to participate in a defined contribution plan,althoughforthemiddle-incomeearners,otherreasonsincludedhavingaspousewithaplanorsimplynotthinkingaboutit(Holden2011).Actinglikeanostrichwithitsheadin thesandcouldbeacostlymistake—onethatmanyAmericanshavemadeandcontinuetomake.In the samearticle cited earlier,Passypointsout that simply adding another

fouryearsoflifetocurrentprojectionswouldrequireanadditional$160,000ofretirementsavings tomaintainevenamodest lifestyle—whichputs thecurrent$60,000 average retirement balance into stark perspective. Whose retirementstrategies are likely to remain unaffected?According to StephenC.Goss, thechiefactuaryoftheSocialServicesAdministration,itissomeonelikeBillGateswithunlimitedmeans.

IntroducingtheSuperSaversItisnotalldoomandgloom,however.ThereisasignificantgroupofpeoplewetermSuperSaverswhoaredoingeverythingpossiblenotjusttobecomfortablewhen they retire, but to actively lower the age atwhich they choose todo so.These Future Early Retirees exhibit characteristics that have helped us toidentifythehabitsthatneedtobehighlightedinanycampaigndesignedtostressthe importanceofretirementreadiness—ifnotforBabyBoomers, thenat leastforthegenerationsthatfollowthem.In2011,theTransamericaCenterforRetirementStudies(TCRS)discovereda

hidden cohort of Super Savers within the data of its Twelfth AnnualTransamerica Retirement Survey. These findings were released in a reportentitledASourceofInspiration:FutureEarlyRetirees.ThisSuperSavergroupisn't especially privileged or affluent; they'remostly your average Joe or Jane(theMillionaireNextDoor),whorealizethatifyouwanttocontrol,ratherthanbecontrolledby,life'scircumstances,ithelpstohaveaplaninplace.Much ofwhat is described in that report applies toAmyHaley, one of our

intervieweeswho,attheageof26,hasbeensavingforretirementsincetheageof18andcontributesbetween10and20percentofherearningseverymonth.Describingherselfasacompulsivesaversincechildhood,whenhermedium

was a piggy bank rather than a 401(k) plan, Amy admits to being heavilyinfluencedbyhergrandfatherwithrespecttothewayheinvestedandmanagedhismoney.Formerlyateacherandlateranengineeraftergoingbacktocollege,Amy'sgrandfatherdied leavinghiswidowwith the ability to live comfortablyoffofhisconsiderablesavings.Amy'sbehaviorissimilartothatoftheFutureEarlyRetireescitedbyTCRS

who always chose to participate inwhatever retirement plans their employershadmadeavailable,startedtosaveearlyinlife(medianage25),andexhibitedagreaterpropensity tobe involved inmanagingandmonitoring their retirementaccounts. This behavior is in stark contrast with most of her peer group,however.SaysAmy:Ihavepeersherewhoarefive,six,seven,tenyearsolderthanmeandknowfar lessaboutwhat it reallymeans to contributeanyamountofmoney toaretirementplan,andwhyit's important.Theydon'tseean immediatebenefitandtheyhavenevertakenthetimetoeducatethemselvesaboutit.

Whenyou'rehiredon,wehaveameetingwithHR to signup for insuranceandbenefitsandthingsofthatnature,soweonlygetaone-timeexposure.Wedohavea financialadvisorwhocomes to speakwithus roughlyonceamonth. But you have to schedule an appointmentwith him and you kind ofhavetotakesomeinitiativetoseekoutanswersfromhim.Iguessifwereallywanttopushformorepeopletobemoreknowledgeableonthesubject,companiesshouldnotassumethattheyaregoingtoseekoutthoseresourcesoreducatethemselves,becausethat'snotbeenmyexperience.As the nineteenth century “father of psychology” William James once

pronounced, “All our life...is but a mass of habits.” Trying to unpack all thepsychologicalandothervariablesastowhysomepeople,likeAmyHaley,makebetter preparations for their long-term security than others—even if that werepossible—wouldmakeanyone'sheadspin.Whatispossible,andweattempttodointhisbook,istoalignourunderstandingofpeople'shabits,theirbehaviors,and theirbeliefs,withsupport fromall stakeholders:employers, the retirementindustry,policymakers, themedia,aswellas theaverageAmericanworker, sothatpreparingforretirementcanbecomemoreroutineandautomatic.How?As theNew York Times's CharlesDuhigg points out in his bookThe

PowerofHabit:WhyWeDoWhatWeDoinLifeandBusiness,inordertogetinto the “habit loop” we need a “keystone habit that creates a culture.” Oneexample was the way pioneering advertising genius Claude C. Hopkins soldtoothpaste to the American public back in the early years of the twentiethcentury.Brushingone'steeth,atleastdaily,wasnotasocialnormformostAmericans

backinthosedays.ButHopkins,understandingthepowerofhabitmodificationanditslinktorewards,wasdeterminedtopromote(andhencesellforhisclient)anewtoothpastebrandcalledPepsodent.Hedidsobynotonlyhighlightingtheadvantageofhavingabeautifulsmile,butstressingthegreat-tastingfeelingthatcomesfrombrushingyourteethregularly.OnceAmericanshadgottenintothehabit of brushing their teeth and experiencing the difference for themselves,missingevenonedayjustdidn'tfeelright.NotethatwhatHopkinsknew—asdoallsuperioradvertisinggeniuses—isthatwebuyintoamessagemorebecauseoffeelingsandemotionsthanwedofromrationalargument.Unfortunatelymostofwhatwedointheretirementservicesindustryhastodowiththelatter.Ofcourse,aone-timemessage isneverenough.Undoubtedlyregular,catchy

advertisingmessageslike“You'llwonderwheretheyellowwentwhenyoubrush

your teeth with Pepsodent” provided the necessary trigger—or cues—thatprompted Americans decades ago to adopt what is now a daily, automaticbehavior.Arguably one of the most compelling cues prompting Americans to review

theirretirementreadiness(or, insomecases,sticktheirheadsevendeeper intothesand)hascomefromthestateoftheeconomyandtherecentfinancialcrisis.Fears around unemployment, changing company retirement and health carebenefits, curbedpay increases, and the ever-rising cost of health care have allconspiredtoprovokemoreandmorepeopletoreconsiderwhatitwilltaketobeabletoretireasanticipated.AsTowersWatsondiscovered in their2011RetirementAttitudes survey, the

averageAmericanworkerisacutelyawareoftheirvulnerabilitywhenitcomestohavingenoughmoneytomaintaintheirpreretirementlifestyleandtheriskofoutlivingtheirsavings.Thecloser theyare to the finish line,as is thecasewithpeopleover50, the

moreconcernedtheyareabouttheirretirementsecurity,notjustwithrespecttotheir own lack of good saving habits, but because of changes being made toexistingretirementplanbenefits.AlmostaquarterofrespondentstotheTowersWatson survey reported recent changes to their employers' retirement plans,includingmaking theplanunavailable tonewhires, freezingbenefit increases,oradoptingaDB/DChybridplan.Additionally,18percentcitedreductiontoorelimination of the employer matching of employee contributions within their401(k)plan.The irony is, the Boomer generation (whose concerns about declining

retirement account balances and the risks of reduced company retirementbenefits are spiking anxiety levels, as reported across many surveys) shouldneverhavefoundthemselvesinthispredicament.BoomersrepresenttheUnitedStates' biggest-evergroupof earners, collectively earning twice asmuch ($3.7trillion)asthe“silent”generationthatprecededthem($1.6trillion,accordingtoa2008McKinsey&Co.reportentitledWhyBabyBoomersWillNeedtoWorkLonger). But their ratio of debt to net worth is 50 percent higher than the“silents” because Boomers have consumed more and saved less, takingadvantageof theavailabilityofeasycreditand low interest rates.The topicofconsumerismisonewewillreturntotimeandagaininthisbook.Misplaced confidence in the value of their home equity and the belief that

returnson their investmentswere justgoing tocontinuegoingupanduphaveleft (according to the McKinsey report) 69 percent of older Boomers (born

1945–1964)financiallyill-preparedforretirement,andmanyofthemdon'tevenrealize it.For them,perhaps theirbestoptionis todelaytheageatwhichtheyplan to retire.That,ofcourse,assumes that their skillsarestill indemandandrelevanttothemarketplace,ortheyhavethecapacitytoquicklylearnnewones.And that they have the health, vision, hearing, mental and physical agility toremaincompetitiveintoday'shigh-paced(andhigh-tech)workingenvironments.In some cases there are legal and institutional barriers currently in place thatimpedepeoplefromcontinuingtowork,likeairlinepilotsforexample,whoareprecludedfromworkingbeyondacertainage.Thankfully this isn't the complete picture of life in America today. As we

alludedtoearlier,thereisanothergroupthatrepresentsasignificantglimmerofhope:thoseSuperSaversorFutureEarlyRetireeswhoareontargetwithhighersavingslevelssothattheymightexperiencethelaterlifetheyhaveimaginedandplannedfor.Arguably the clearest picture of how theseFutureEarlyRetirees think, feel,

and act comes from the TCRS report A Source of Inspiration: Future EarlyRetireesmentionedearlier.Sowhatdoweknowabouttheseindividuals?We can highlight those characteristics that have helped the Future Early

Retirees more successfully realize their retirement readiness goals, but alsocompare them with the general population captured by the Twelfth AnnualTransamerica Center for Retirement Studies Survey which polled U.S.employers andworkers on their attitudes toward retirement. From this survey,TCRSfoundthatafull21percentofrespondentsexpectedtoretirebeforetheyreachedtheageof65.Whilethatmightnotseemlikealargepercentageofourpopulation, given the difficulty of just retiring at a normal retirement age,wewere encouraged by these statistics. Even more encouraging was that, aspreviouslymentioned,theseFutureEarlyRetireesareotherwisenotexceptionalpeople. Just over half of them have a college degree, they aremostly in theirthirtiesandforties,andthemajorityofthemearnlessthan$100,000ayear.Whatdoesmakethemspecial,however,istheirhighdegreeofconfidencethat

they will be able to retire comfortably and enjoy activities like travel andpursuinghobbiesmoresothanotherrespondents.Theirattitudesandbehaviorswouldleadustobelievethisconfidenceisnotmisplaced.Morethananyothergroup, saving for retirement was cited as their main financial priority. Asluminariessincethedawnofhumankindhavestressed,whatwebelieveandactuponbecomesourreality.TheseSuperSaversarecertainlyevidenceofthat.Suchoptimal savingspatternshave led theFutureEarlyRetirees tobemore

likely to rely on personal savings and investments as an income source inretirement, in addition to 401(k), 403(b), and other workplace retirementaccounts.TheFutureEarlyRetireesare least likely toexpect to relyonSocialSecurity(16percentversus30percent).Unliketheaverageretireewhoexpectstogiveupworkatage65orlater,thisearlyretirementgroupisrelyinglessonthe performance of their investments and hedging their bets with increasedsavings.ThehabitsoftheseFutureEarlyRetireesareworthhighlighting.Therecession

mayhavehitthemjustthesameaseveryoneelse,butthathasnotstoppedthemfromsavingjustasmuch,ifnotmore,thantheydidbefore.Theyarealsobetterpreparedwithgoodhabits,includinghavingestablishedaretirementstrategy(71percent of Future Early Retirees compared with 52 percent of Americansgenerally),havingaback-upplanshouldthatstrategynotworkout(29percentcompared with 16 percent), and being much more personally involved inmonitoring and managing their retirement savings accounts (71 percentcomparedwith58percent).Theyalsohavemoreambitiousretirementsavingsgoals:$750,000compared

with$650,000forthosewhoplantoretireatage65and$500,000forthosewhoplantoretirelater.LikeAmyHaley,mentionedearlier,theFutureEarlyRetireesaremorelikelytoachievetheirgoals,giventhattheydefermoreoftheirannualearningsintoacompany-sponsoredplanthanothergroups.Nevertheless, thesedifferencesaren'tallunder theirowncontrol.TheFuture

EarlyRetireesarealsomorelikelytohaveaccesstoacompanyretirementplan(including pensions, 401(k)s, and similar plans) than those respondents whoexpect to retire later, making the cooperation of employers with respect toestablishing, promoting, andmaintaining some form of retirement plan vitallyimportant.Theissueofcoverageissomethingwewillcomebacktolaterinthisbook.What is somewhatmore complex to get a handle on is the extent towhich

peoplewantotherstomakeretirementsavingsdecisionsforthem—aswouldbethecasewith“auto-everything”thatwediscussinmoredetailinChapter7.Forexample, while only a small percentage of workers in the Twelfth AnnualTransamerica Center for Retirement Studies Survey said that they wanted tohand over this control, the Towers Watson study found that most Americanswould in fact prefer others to look after their retirement investments, inexchangeforstrongerguaranteesthattheirnesteggwouldn'tloseitsvalue.Sowhatisthetruth?Manyofourindustryexperts,duringourinterviewswith

them,expressedconcernaboutthedisengagednatureofmanyworkerswhenitcomes to this vitally important topic of retirement readiness. On severaloccasionsweweretoldhowmanyofthehighlyintelligent,professionalpeoplethattheseindustryprofessionalsknowspendverylittletimethinkingaboutandpreparing for retirement. One example was given where an otherwise well-educatedprofessional,whoknew the importance of retirement planning, spentnomorethan15minutesonthetopic.Andwearenottalkingabout15minutesamonth here, or even 15 minutes a week, but 15 minutes a year. That isconsiderablylessthanthetimemostpeopletypicallyspendplanningaweekendgetaway!Sowhatiscausingthisaversiontofacinguptoone'sretirementfuture,atleast

fortheaverageAmerican?PerhapsitisthefaultofwhatDavidBachtermedTheLatteFactor®—allthat

financial advice that sayswe need to sacrifice our daily latte in order to havebettersavingslevels.ButthisisnotthecaseforAmyHaley.Infact,becauseshehasintuitivelyembracedsomanyofthecharacteristicsofaFutureEarlyRetiree,sheisabletoenjoyamorebalancedlife.Shetoldusthatthereisacafeteriainthe basement of her office building that she visits most days for a breakfastburrito.Okay,thatmeansafewdollarslessthatsheissavingforarainyday,butsinceAmy is otherwise doing all the right things she doesn't feel the need todeprive herself.Many of our interviewees echoed that sentiment, pointing outthat ifyoubeginearlyenoughanddoall the right thingsyoucanhavebothasufficientretirementnesteggforthefutureandenjoythepresentwithcontrolledspendingandanoccasionalsplurge.Whichbringsusbacktoourearlierquestionofjusthowmuchisenoughwhen

itcomestoretirementsavings.Howdoweeffectivelyplanforretirementwhenwe cannot know how long we will live and may significantly outlive ourexpectedlongevity;wesimplydon'tknowforhowmanyyearsofretirementweareplanning.As Fred Reish, Partner/Chair of the Fiduciary Services ERISA Team at

DrinkerBiddle&ReathLLP,pointedout:“Ithinkpeoplewouldbeshockediftheylearnedthatifyouretireatage65witha$500,000accountbalanceandyouwithdraw 5 percent or $25,000 a year, adjusted for inflation each year, thatthere'sasignificantriskyoucouldrunoutofmoneybeforeyoudie.”That is where having enough knowledge and not just enoughmoney to last

during retirement comes into play. There has been raging debate in theretirement services industry about the state of financial literacy among plan

participants specifically and the average American worker in general. Theargumentsessentiallyfallintotwocamps:onesidesuggeststhatweabdicateourlong-standing efforts to educate the averageAmericanworker on the groundsthatfinancialliteracy—evenbasicfinancialliteracy—isbeyondtheirgrasp;theotherproclaimsthateffortstocreateinformedinvestorsisamoralimperative.As Todd Lacey, Senior Vice President of Strategic Distribution at

TransamericaRetirementSolutionspointsout,“We'vespentalotoftimeasanindustry trying to educate plan participants on how to invest their retirementaccounts. I'm not sure if that's the right approach. Perhaps our mistake as anindustryhasbeenputtingtoomuchemphasisoncreatingalotofdoctorswhenwhatpeoplereallywantisjusttobecured.”ButLaceygoesontoemphasizethatwhilewemaynotneedtocreatedoctors,

we do need to ensure the patient (participant) is adequately informed andeducatedtomakefundamentallysounddecisionswhenneeded.As youmight imagine, both sides of this argument havemerit.Whilemost

peoplewill never be truly informed investors, a fundamental understandingofbasic financial concepts does seem to be an imperative. Financial literacy is atopicweexploreinfurtherdetailinChapter5.As previously mentioned, the average current account balance is

approximately $60,000, which makes the $500,000 balance Fred mentions asignificant accomplishment by most measures. Yet, even with an abnormallyhighaccountbalance, if improperlymanaged there is still significant riskof afinancial shortfall in retirement. Does the average person understand how to“draw down” their retirement assets? While defined benefit (DB) plansautomatically performed this essential draw down of assets by guaranteeinglifetime income, defined contribution (DC) plans like 401(k)s and 403(b)stypicallydonot.Thisdraw-downfeatureofaDBplan,oftentakenforgrantedby participants, is one of the true gems of the defined benefit plan.DC planssimply present retirees with a balance upon retirement with which they (theretirees) have multiple options. As such, understanding how to make one'sincome last a lifetime would seem to be essential to achieving security inretirement.Asmentioned earlier, a math problem that has stumped humanity since the

beginning of time is trying to calculate our individual life expectancy.Whileactuarial tables for life expectancy will tell us very precisely how long theaverage American will live, we simply cannot know how long we, asindividuals, will do so. In fact, life expectancy is, by its very definition, the

averagelifespanofagroupofindividuals,indicatingthatapproximatelyhalfofus will live longer and half of us will not. This concept of outliving our lifeexpectancy—andpotentiallyourincome—isknownaslongevityrisk.Arguablyoneofthemoresensibleactionspeoplecantakeistopoolatleastaportionoftheirretirementassetswithothers.Iftheydo,asagroup,theircollectivelifespanwillmorecloselyapproximatetheaveragelifeexpectancy.Thisallowsthemtomore clearlydefinehow long theywill (onaverage) live andcreate a lifetimestreamofincomethatwillhelperadicatetheanxietythatsomanyAmericansareexperiencingthesedaysbecausetheyfearthattheywillrunoutofmoneybeforetheydie.Thisconceptoflifetimeincome—andannuities—hasrecentlyreceivedasignificantamountofattentionwithintheretirementplanindustryandwillbeaddressed further, specifically in relation to longevity risk, in Chapter 4. Thepoint we simply want to make here is that there is complexity involved inretirement planning, no less than those issues grappled with by the ClintonGlobalInitiative,Google'sSolveforX,orEliLilly'sInnoCentivementionedintheIntroduction.Assuch,aneffectivelong-termsolutiontoretirementreadinesswillrequirenewanddifferentmindsandideas.Further,evenifwerelyheavilyoncurrentindustryexpertsto,asLaceystates,

“just cure the patient,” the average American worker must be equipped withsomebasicfinancialknowledge.Thatwouldatleastpreparethemsomewhattonavigatethecomplexdecisionssurroundingretirementandretirementplanningbecause,atsomepointintime,theywillhavetomakedecisionsforwhichtheyareultimatelysolelyresponsible.WhiletheSuperSaversgiveushope,theIllPrepareddominateourlandscape.

TheAmyHaleysofourworldshowus thepossibilitieswithdiscipline,effort,andknow-how,perhapsinfluencedbyearlychildhoodrelationshipsliketheoneAmy had with her grandfather. They have somehow elevated the task ofretirementplanningtoalevelofsignificanceintheirdailylives.Theytakethetime toenroll in their company retirementplan, tounderstand their company'sbenefit structure, and to proactively allocate their accounts to appropriateinvestments.Theysetgoalsandmonitortheirprogressonaregularbasisand,asaresult,savesignificantlymorefortheirfuture.Theyaresomehowabletofindabalance between the temptation of rampant consumerism and the pragmaticphilosophyespousedbysomanyretirementplanpractitioners:payyourselffirstbycommittingtoyourfuture.Unfortunately, Amy is not the norm...not even close. To put it bluntly, the

American worker has simply not gotten the memo. Our life expectancies are

increasing on a daily basis and the financial burden of retirement goes rightalongwith it.Ourappetite for thepresentstill faroutweighsourdiscipline forthe future. On the whole, and in stark contrast to the habits of aminority ofSuper Savers, we don't prioritize saving, we don't take the time to learn andunderstand our company's benefit structures, and we routinely lose the battlewith consumerism.The averageAmericanworker has a front row seat on theTitanic,headedforaretirementiceberg.Sowhose responsibility is it anyway?As JayVivian,who for years ran the

IBMretirementfundanddescribeshimselfasaLibertarian,realisticallypointedout,“Well,it'sclearlymoneytodowithasyouplease.Ifyoudecidetoblowitall on a longweekend in LasVegas, or otherwise spend it frivolously, or areunfortunateenoughtogetrobbedofallyoursavingsandpossessions—whoendsupholdingthebag?Whatwe'relookingathere—andweare—isasocialwelfareissue,notjustanindividualone.”Jayis100percentcorrect:retirementreadinessisnotjustanindividualissue

and it is not just an industry issue, it is a social issue—and an incrediblyimportantone.Thereisalotmoreatstakeherethancomfortinretirement.Itisreallyaboutsurvivaland there isa lotofwork thatneeds tobedone togetusbackontrack.But letusconsider thatforamoment.Wereweeverontrack?Bywhichwe

mean, was there ever a cohesive vision for retirement embraced by allstakeholders:fromindividualstoindustry,fromemployerstopolicymakers?To answer that question let us take a brief trip back in time to review the

historyofthisconceptwecallretirement.

Chapter2

ABriefHistoryofRetirement

OttovonBismarckwouldprobablyincreasetoday'sretirementageto78—ormaybe75,ifwegivehimthebenefitofthedoubtformellowinginoldage.

—MartinHüfner,TheGlobalistEveryweek, bored and lonelyFrankMoseswould tear up his Social Securitycheckasarusetocallandflirtwiththewomanwhoprocessedhisgovernmentpension. So begins the movieRED (Retired Extremely Dangerous), the 2010comedythrillerinwhichfourformerCIAoperatives,includingMoses,teamupto totemachineguns,break intoLangley,evadecapture,andexposeascandalinvolvingtheVicePresidentoftheUnitedStates.The main characters are played age-appropriately by Bruce Willis, John

Malkovich,HelenMirren,andMorganFreeman,whoaverage62yearsamongthem. At one point in the movie Victoria, played byMirren, admits that shebreaksupthemonotonyofherretiredlifebytaking“theoccasionalsidejob.”Contrast that movie with the little-known silent short directed in 1911 by

pioneeringfilmmakerD.W.Griffith(bestknownforhiscontroversialTheBirthofaNation).WhatShallWeDoWithOurOld?featuresanelderlycarpenterwhobecomesoneof thoseworkersweededoutbyanewforemaninpreferenceforyounger, stronger, and more energetic employees. Unable to find newemploymentbecauseof his age, andwithhis savings exhausted, the carpenterstealssomefoodforhissickwifeandissubsequentlyarrested.YouTubeviewerscanwatchthejailingandlaterreleaseoftheoldcarpenter(to

the strains of Tchaikovsky's dramatic 1812 Overture), after “the kindlyjudge...movedbyconscience”sendsapolicemantoverifyhisstoryofhavinganailingwife.Thegroupreturnswiththefoodtofindthewomandead.Thefinaltitlecarddeclares,“Nothingfortheusefulcitizenwoundedinthebattleoflife,”possibly referring to the fact thatwhileUnionArmyveteransat the timewerereceivinggenerouspensions,therewasscantfinancialprotectionforincreasingnumbers of older workers whose skills no longer aligned with the needs andpaceofmodernsociety.

Theearlypartofthetwentiethcenturyofferedfew,ifany,pensionprovisionsoutside of the dozenor so private pensionplans thatweremostly available toemployeesofpublicutilities,banks,andlargeindustrialcorporations.(Thefirstcorporate pension plan in the United States was established by the AmericanExpressCompanyin1875.)Lessthan100yearslatermarketerswerelookingforwaystoglamorizeretirementasameansofhelpingretireesspendtheir leisuretime—andtheirmoney.Duringthattimetheconceptofretirementhasreflecteddifferentnotionsofpushandpullbetweenemployersandemployees.Whatiseasytooverlook—andwhatwefocusoninthischapter—aretheroles

that retirement and the emergence of the pension plan have played in oureconomic, political, and social lives.By reviewing this topicmore closelywealsowant touncoverwhether, at any time, therehasbeenaunifying,nationalvisionaroundretirement.

TheRiseofRetirementFor retirement to make any sense at all—the word derives from a sixteenthcentury verb meaning “to retreat”—there needs to be some period of timebetween the end of work and the end of one's life. As Mary-Lou Weismanpointedout inherNewYorkTimes articleentitled“TheHistoryofRetirement,FromEarlyMantoA.A.R.P.”:“Inthebeginning,therewasnoretirement.Therewerenooldpeople.”As our nation transitioned from a largely agricultural society to an

industrializedoneatthedawnofthetwentiethcentury,theaccompanyingagingoftheworkforcepresentedachallenge.Whatwerewetodowitholderworkerswho—whether in reality or otherwise—were perceived as not having thestrength,speed,mentalagility,andadaptabilityrequiredbyindustriesthatwereincreasinglyinfluencedbytheburgeoningscientificmanagementandefficiencymovements?IftheUnitedStateswastobecomeaglobaleconomicpowerhouse,its focus needed to be on increased productivity. At the time, retiring olderworkers in favor of the young made economic sense, given that their longertenure typicallymeant they earned higherwageswhile at the same time theirskillssetswerenolongerasvitalastheyusedtobe.AsDoraL.CostawritesinThe Evolution of Retirement: An American EconomicHistory 1880–1990: “...theLinotypemachine turned the printing industry from a class craft inwhichtypewassetbyhandinthousandsofsmallshopsintoanindustrythatrequiredrelativelylessskillbutgreaterspeed.”

Inhis1882sciencefictiondystopiannovel,TheFixedPeriod,EnglishnovelistAnthonyTrollope(1815–1882)envisionedafuturisticsociety—thebookwassetin1980—inwhichindividualswereforcedbylawtoretireatage67andbeginayear of contemplation that prepared them to be “peacefully extinguished” bychloroform.The topic of euthanizing the old became the focus of considerable media

attentionwhenSirWilliamOsler,oneofthefoundersofJohnsHopkinsHospitaland its physician-in-chief, delivered his valedictorian address entitled “TheFixedPeriod”inFebruary1905.Reputedtobeapracticaljoker,itislikelythatOsler—amere55yearsoldat

the time—hadhis tongueplaced firmly inhischeekwhenhepointedout“thecomparative uselessness of men above the age of 40,” and “the incalculablebenefit it would be in commercial, political, and in professional life if, as amatterofcourse,menstoppedworkingattheageof60.”Thisobviouslydidnotapply to him, given that Osler subsequently accepted a post at OxfordUniversity,whereheworkeduntilhediedat70.Itwasn'tjustslowerfactoryhandsthatfacedtheagediscriminationthatbegan

to rear its ugly head as theworking population began to age.Decades beforeArthurMillerwroteDeathofaSalesman(1949)—inwhichthelowproductivityofthemaincharacter,60-year-oldWillyLoman,renderedhimaliabilitytothecompany—salesmeninlatemiddleageandbeyondwereresortingtodyingtheirhair, among other things, in an effort to look more youthful. Magazines likeSalesmanship (“Devoted to Success in Selling”) were promoting the newprofessionalism of their business, for which older salesmen were thought notwellsuited.According to William Graebner, author of A History of Retirement: The

Meaning andFunction of anAmerican Institution 1885–1978: “A 65-year-oldsalesmannamedElder confronted reality rather than theorywhen the assistantdirector of sales and the vice president requested his retirement under thecompany'snewpensionplanbecausehewas‘toooldamantoadoptourpresentmethods’andbecausehewasnotsufficientlyactivetoadequatelycoverhislargeterritory.”Elderwas,nevertheless,oneoftheluckyones,giventhathiscompanydidat

leastofferemployeesapensionplan.Privatedefinedbenefitplans(meaningthatcontributions were made solely by the employer, not by employees, and thebenefitwas defined at retirement in the formof a stable income stream)werestillrelativelyrare.

Thepopularityoftheprivatepensionplanbegantogrowfollowingchangesinthetaxsystemthat,beginningin1916,allowedsumsfurnishedbyacorporationto a fiduciary-managed employee pension trust—thereby keeping themcompletely separate from company assets—to be deductible from grosscorporateincome.Extending the nineteenth century sensibility of paternalism toward one's

employees, the economic benefits of attracting workers by offering a definedbenefit pension plan became apparent. For example, in a note to chemicalmanufacturer Thomas Coleman du Pont, cited by Graebner, retired bankerGeorgeW.Perkinswrote:“Ihaveneverheardofanyplanexceptonethatwouldassistinregulatingsalariesandthatisapensionplan....Therightsortofpensionplancomesprettynearbeingapanacea formostof the ills that existbetweenemployerandemployee.”InmanyrespectsPerkinswasright.Knowingtheyhadapensiontofallback

on gave aging employees in the first few decades of the twentieth century asense of security, impacting their state of mind and, as a consequence, theirproductivity.And, from the employer's perspective, the pension helped reduceturnoverandmitigatethedemandforhigherwages.In economic terms, then, these early pension plans served a variety of

purposes: They were a form of permanent unemployment relief for olderworkers who were unable to get jobs; they helped open up jobs for youngerworkers and incentivized them with the promise of promotions; and theydeferredwageincreaseswiththepromiseofsecurityinretirement.Unfortunately,theearlydaysofthedefinedbenefitplanbeingcharacterizedas

the “goodolddays” is largely amyth and so the issueofold-agedependencyremained.AsGraebnerpointsout,by1932only15percentofAmericanswerecovered by such plans, with “perhaps 5 percent of those who neededbenefits...actually receiving them.”The rulesunderwhichemployeesqualifiedforpaymentstendedtobeonerous.Forexample,fewplansprovidedbenefitsforworkers' spouses, they often required a minimum of 15 years of service, and“only 10 percent of the plans legally obligated the company to any kind ofpayment.Additionally,becausefewoftheplanswerecontributory,mostdidnotoffertheadvantagesofaccumulatedforcedsavings.”So,asthetwentiethcenturymarchedonitbecameclearthatsomethinghadto

bedone at the federal level toprotectU.S. citizens from theharsh realitiesofmodernlife.Anumberofstateshadtriedbutnotalwayssucceededininstitutingold-age pension plans, such as Massachusetts in 1903, Arizona in 1915, and

Pennsylvaniain1923.WhatreallyturnedthisintoamajorpoliticalissuewastheGreatDepression,whichbeganin1929andlastedapproximately10years.Longperiodsofunemploymentduring that timewipedoutpeople's savings.

Those workers who relied on private or trade union pension plans for theirsecurityfoundthatmostofthemhadbeendiscontinuedortheirbenefitsslashed.Publicsympathyfortheelderly,especiallynowthateventhemiddleclassriskedendingupinalmshouses,hadswelled tosuchproportions thatpoliticianswerecompelled to look forways to institute some formof assistance at the federallevel. For inspiration, they turned to nineteenth century Germany and thebrainchildofthatcountry'sIronChancellor.

PoliticsandthePensionThe distinction for having helped to create the world's first national socialinsurancesystemgoes toGermanChancellorOttovonBismarck(1815–1898).RecognizingtherisingappealofMarxisminhiscountry,hewasdeterminedtocountertheirdemandsforincreasinglyextrememeasureswitha“socialist”planofhisown.PersuadingWilliamtheFirstthatsocialwelfareofthepoorwasanissueofnationalsurvivalatatimeofincreasingvolatility,theEmperorwrotetotheGermanParliamentin1881,“Thosewhoaredisabledfromworkbyageandinvalidityhaveawell-groundedclaimtocarefromthestate.”BismarckisfrequentlyyetwronglycreditedwithhavinginfluencedtheUnited

States to set the demarcation line for old age at 65 years—the point atwhichmostpeopleareconsideredpensionable.AstheSocialSecurityAdministration'swebsitepointsout,Bismarckhadnothingatalltodowithit.The age at which Germans were eligible to receive old age and disability

insurancewas originally set in 1889 at 70 years, not 65.Given that very fewpeoplelivedthatlonginthosedays(Bismarckhimselfwasanotableexception,being74atthetime),thiswasnotplannedtobeanexpensiveprogram.Thatagelimitwasshifteddownto65in1916,atwhichpointBismarckhadbeendeadfor18years.WhileinmanyotherpartsofEuropeandtheworld(asinGermany)65remains the official retirement age, theUnited States has taken steps to delaySocialSecuritypaymentsasaresultofourlivingmuchlongerthanwedidatthedawn of the twentieth century. Whereas life expectancies have increasedsignificantly,however,theSocialSecurityretirementagehasonlyincreasedbytwoyears,from65to67.

Why did the United States originally decide upon 65 as the retirement agewhen the Committee on Economic Security (CES) was drafting itsrecommendationsforSocialSecurityOldAgeInsurance,enactedin1935aspartofPresidentFranklinDelanoRoosevelt'sNewDeal?According toSocialSecurityOnline, thedecisionwas influencedby thefact

that while the private and state old-age pension systems in force at that timewereequallysplitbetweensettingtheretirementageat65andage70,thenewfederalRailroadRetirementSystem,passedbyCongressin1934,leanedtoward65astheageforworkerstoretire.Actuarialstudiesusedatthetimesealedthedeal.Social Security Old Age Insurance was, like the Union Army pension

provisions, originally limited in scope—but that soon changed. According toCosta,only43percentof the labor forcewascoveredwhen the lawwent intoeffect,sinceworkersontherailroads,inagriculture,domesticworkers,andtheself-employed were excluded. Government workers also did not qualify, butwereseparatelycoveredunderalawenactedin1920.TheAmericanSocialSecuritysystemmirroredBismarck'sGermanmodel in

that contributions were required from employees, employers, and thegovernmentinordertoavoidfuturecostsbecomingoverwhelming,accordingtotheCommitteeonEconomicSecurity.Asoriginallyconceived,aworkerwhodiedbeforetheyreachedtheageof65

could receive a money-back guarantee from Social Security, equal to hisindividualcontributionsplusinterest.Benefitpaymentsweretobedeferreduntil1942, bywhich time a significant surpluswas expected to have accrued fromincreasesinthepayrolltaxrate.Thisratewastoincreaseincrementallyfrom2percentonthefirst$3,000earningsduringtheyears1937to1939,withyearlyincreases thereafterof1percentuntil that figure reached6percent in1949,atwhichpointitwaspresumablytobecapped.Thethinkingwasthataspayrolltaxeswerebeingpaidandaccumulating,the

earned interest and revenues that had accrued by 1949 “would support thesystemindefinitely.”Counteringargumentsthatincreasingdemandsonthesystemcouldbemetby

borrowingfromfuturebeneficiariesinordertomakepaymentstopresentones,theSecretaryof theTreasuryHenryMorgenthaustatedthatplacingconfidenceinthetaxingpowerofthefuturetomeetcurrentneedswasaperspectivehedidnot share, saying “We cannot safely expect future generations to continue todivertsuch largesums to thesupportof theagedunlesswe lighten theburden

uponthefutureinotherdirections....Wedesiretoestablishthissystemonsuchsound foundations that it can be continued indefinitely in the future” (Costa1998,173).UnfortunatelythepopulationtrendsthatRoosevelt'sCommitteeonEconomic

Security used to predict that by 1990 more than 12 percent of the Americanpopulacewouldbeover64yearsofagedidnotforeseethepostwarbabyboom,whichendeduprenderingtheirmodestprovisionsinsufficient.Also unfortunate was the fact that Morgenthau's actuarial principles were

abandoned because of intense political pressure, including concern in somequarters that the unspent surplus could be raided by government spending.Amendments to the Social Security Act in 1939 removed the money-backguarantee,payoutsweresettobeginin1940not1942,andthe1percentincreaseinpayrolltaxesthatwasduetobeginthatsameyearwasrepealed.While a fascinating topic in and of itself, not least because of the current

challenges we are facing and concerns about the future viability of SocialSecurityinthetwenty-firstcentury,readersinterestedinfurtherexplorationarerecommendedtolooktothebooksalreadymentioned,byGraebnerandCosta.But just because the environmentwas set up forworkers to retire at age 65

withsome financial provisionsput inplace, it didn't necessarilymean that theaverageAmericanatthetimewasquicktoadapttotherelativelynewconceptofan extended, leisured retirement.Formany thenotionsof transitioning fromaproducertoaconsumerandfacingaspanofretirementthatmorethandoubledthatofthepreviousgenerationweresoalienthatthatchairmanofaconferencesponsoredbyglassmanufacturerCorninginMay1951suggested,“Perhapswehavetoglamorizeleisureaswehavenot.”

MarketingtheSeniorCitizenWhenwethinkofthosepeopleweknowwhofallunderthecollectiveterm“theretired,”weareunlikelytorecognizethedescriptionofferedbyIrishpoetW.B.Yeats(1865–1939)who,inWhenYouAreOld,referstobeing“grayandfullofsleepandnoddingby the fire.”EvenEleanorRoosevelt referenceda similarlysedentaryimageofretirementwhensheremindedtheaudiencelisteningtohertalkentitled“OldAgePensions”theyearbeforeherhusbandpassedtheSocialSecurity Act that “Old people love their own things even more than youngpeopledo. Itmeanssomuchtosit in thesameoldchairyousat inforagreat

manyyears,toseethesamepicturethatyoualwayslookedat!”Less than twodecades later,when society's focus hadwell and truly shifted

fromproducinggoodstostimulatingconsumerism,whobetterthantheretiredtopopulate this new frontier of leisure and spending? Indeed, by the 1950s, thelivesoftheover-60swerestartingtobecompletelytransformed.Asworkforceparticipationratesdeclinedandtheaveragehealthoftheelderly

improved,mid-twentiethcenturyretireescouldexpectconsiderablymoregoldenyears than had been anticipated inBismarck's day. Plus, they now had plentymore outlets for their increased wealth: the availability of mass tourism; thepopularityofArizona,California,andFloridaasplaceswithbetterweatherandcommunities designed for the elderly; the rapidly booming entertainmentindustry;andcheapersportingandrecreationalgoods.Butgettingpeopletotakeadvantageoftheseopportunitiesrequiredachange

of focus. So began the marketing of life as a senior citizen. Even the wordretirementcameunderscrutiny.IntheirfirstissueofRetirementPlanningNews,the editors took umbragewith the concept of the “withdrawal from the activeworld” that the term implied and suggested renaming this life stage “thefulfillmentyears,”atimewhentheretireehadthe“opportunitytofulfilllifelongdesirestodothingsheneverquitehadtimetodobefore.”Manylargeinsurancecompanies,inwhichmenwerenowrequiredtoretireat

65 and women at age 60, created formal retirement preparation programs toassist them. Some of the larger American companies even went as far as tointroducemessagingaboutretirementtoemployeeswhohadreachedtheageof50,theideabeingthathappinessduringretirementwasn'tagiven—ithadtobeplannedfor.Forexample,inhisadmonitionthat“thebestoflifeisyettocome,”theVice

President ofMutual Life Insurance addressed a 1952meeting of theNationalIndustrialConferenceBoardbystressingtheneedtosellretirement“byconstantstoriesofhappilyretiredpeople tellingwhat theydo,butstillmore,ofcourse,emphasizing what they did to get ready for the life they are now living”(Freedman2007,46).Insomecamps,atleast,itwasnotjustaquestionofsimplypreparingpeople

psychologicallyforretirement.JoyElmerMorgan,editorofSeniorCitizen,usedthisplatform to remind readers thatmaturity, responsibility, and self-disciplinewerethehallmarksofthosewhocalledthemselvesseniorcitizens,addingthat:“Failuretofacethelateryearsandtoplanforthemisasignofinfantilismandimmaturity.”

Ironically,whereasasasocietywesoonenthusiasticallyembracedtheconceptof retirement, we seem—in large part—to have misplaced that mid-twentiethcenturysenseofpersonalresponsibilityofplanningforcomfortableandstress-freefulfillmentyears.

WhereistheVision?Thatisabroadoutlineofhowwegottowherewearetoday.Not surprisingly, over the past century the concepts of the pension plan and

retirementhavemorphedinrelationtoprevailingsocial,economic,andpoliticalpressures.Initsearlieststages,theconceptofretirementwasseeneconomicallyas helping to replace less productive aging workers with younger ones; tomaintain loyalty among valued employees and defer wage increases; and toprovide a level of security that paternalistic employers felt was theirresponsibility toward their employees. How are we to view it today? Simplystated, we feel it is the right thing to do to ensure that every American whowantsorneedstocanretirewithdignityandinsomedegreeofcomfort.The challenge that lies before us is the fact that while our longevity has

increased substantially—in that we are now livingmanymore years than ourearly twentieth century forebears—the retirement age has not shifted. Whilethere are a lot of conversations going on around this topic among the variousstakeholders—notleastemployers,industryprofessionals,policymakers,andthemedia—we have not yet succeeded in viewing this issue systemically, unitingaroundasingle,coherent,compellingvision.As we discussed earlier, the average American worker has fallen woefully

behind in thebattle for a fully funded retirement.As thebulkof theBoomersrapidly approach retirement with an average 401(k) account balance of just$60,000(acrossallages)andveryfewyearslefttosave,formanythedefinitionofretirementhastochangeonceagain.While themessagewedeliver to thosewhohavenot savedenoughand still

plantoretireatage65mayhavetobe,“Yousimplycan't,”itisincumbentuponallofustochangethatrealityforthenextgenerationandthosewhofollow.In amoment of honest reflection,we need to ask ourselves: iswhatwe are

doingtodaygoingtoproducebetterresultsforGenerationX(bornbetween1965and1979)andtheMillennials(bornafter1979),orareweonahamsterwheeldestinedforasimilarunsuccessfuloutcomeinperpetuity?

Thegoodnewsisthatthereseemstobeagenuinegroundswellofbeliefthatthebattle for retirement readiness is at an inflectionpoint in theUnitedStatesand that as our society witnesses the Boomers slide into retirement largelyunprepared, more and more people will embrace this challenge and help uschangetheoutcome.But, as Dr. Seuss once wrote, “Should you turn left or right...or right-and-

three-quarters?Or,maybe,notquite?”Withoutaclearvisiontoleadusforward,thechallengemayprovetobetoolargeandasuccessfuloutcometoofaroutofreach.Sowheredowe find inspiration for avisionworthyof a challenge thisimportant?Ourhistoryisrichwithexamplesofboldvisionsontoughissuesthathave led tosuccessfuloutcomes.And in thenextchapterwe turn to,arguably,oneofthemostfamousboldvisionsinrecenthistory.

Chapter3

StateoftheUnion

Houston,wehaveaproblem.—Apollo13(movie)

“Ibelievethatthisnationshouldcommititselftoachievingthegoal,beforethisdecade is out, of landing aman on theMoon and returning him safely to theEarth.”Those words were spoken by John F. Kennedy, before a joint session of

CongressonMay25,1961,asheoutlinedhisvisionfortheUnitedStatesspaceprogram.As he finished laying out his four-part plan for space exploration, President

Kennedywentontostate,“...letitbeclearthatIamaskingtheCongressandthecountrytoacceptafirmcommitmenttoanewcourseofaction,acoursewhichwilllastformanyyearsandcarryveryheavycosts:$531millioninfiscal'62—anestimated$7to$9billionadditionaloverthenextfiveyears.Ifwearetogoonlyhalfway,or reduceour sights in the faceofdifficulty, inmy judgment itwouldbebetternottogoatall.”Itjustcan'tgetanyclearerthanthatstatementofpurpose.Notsurprisingly,the

ensuing decade proved to be one of the most productive eras of spaceexploration inUnitedStateshistory.Yetwhile thechallengewasclearand thegauntletthrowndown,ourresolvewastobetestedonmanyoccasions.Somenineyearslater,onApril11,1970,Apollo13launchedfromKennedy

SpaceCenteratCapeCanaveral,Florida.OnboardwereCommanderJamesA.Lovell,CommandModulePilotJohnL.“Jack”Swigert,andLunarModulePilotFredW.Haise.Apollo13'smissionwastoexploretheFraMauroFormationontheMoon, and a successful landingwouldmake these the third set ofApolloastronautstoreachthelunarsurfacesinceJFK'sdeclarationin1961.Theywouldnevermakeit,butJFK'svisionwouldonceagainbetestedandwouldholdtrue.Twodaysafterliftoffanoxygentankexplodedonboardthespacecraftandthe

lunar landinghad tobeaborted.Theworld spent thenext threedaysonedge,

watching with trepidation as the laser-focused crew and entire support staffdoggedly tackled the myriad of challenges and brought the crippled lunarmoduleandcrewsafelybacktoEarth.Inall,theywereinspacefor5days,22hours,54minutes,and41seconds.ThehighlycelebratedtouchdownoccurredintheSouthPacificOceanonApril17,1970.In one poignant scene in Ron Howard's movie Apollo 13, the director of

NASAisbeingbriefedonthemanychallengesfacingthemoduleasitpreparesfor reentry into the Earth's atmosphere: from the angle of its trajectory towarnings about a typhoon close to the recovery area. Having consideredeverythingthatcouldgowrong,thedirectorcommentsthat“...thiscouldbetheworst disaster NASA's ever experienced.” At which point Flight CommanderKranz(playedbyEdHarris)responds:“Withallduerespect,sir,Ibelievethisisgonnabeourfinesthour.”Asweknow,hewasprovenright.John F. Kennedy once said, “When written in Chinese, the word ‘crisis’ is

composed of two characters. One represents danger and the other representsopportunity.” The Apollo 13 story depicts NASA (and a nation) facing thepossibility of its greatest disaster, yet through sheer determination, teamwork,andaclearvision,opportunityemerges.NASA'sfinesthourisonlypossibleincontrasttothedevastatingresultthatcouldhavebeen.It'sawonderfulreminderforusalltoletthestoryplayout,ratherthanprejudgingitsoutcome.Asdiscussedpreviously,weareindeedinthethroesofaretirement-readiness

crisisandthechallengeisofepicproportions.Wehavetoremindourselvesthattheplayisnotyetover,thestoryhasnotyetbeenwritten,andthatultimatelyit'sourresponsibilitytogettheendingright.Perhapsourfinesthourisyettocome.Thereisarguablynobetterexampleofteamwork,determination,andclarityof

focusthantherescueofApollo13.Thevisionwasabundantlyclear:togettheastronautsbackhomesafelytoEarth.Everymemberoftheteamunderstoodthisand applied the fullweight of their efforts to accomplishing the task at hand.Withoutthisclarity,wouldtheresultshavebeenthesame?Likelynot.Wellthen,ifclarityoffocusissoimportanttoanoutcome,wehavetoaskourselves...howclearisourfocusonprovidingretirementreadiness?Dowehaveanoverarchingmission and is the team galvanized around it? What is our vision for theAmericanworkerinretirementand,ifitisclear,howcommittedarewetoit?While saving Apollo 13 will never be characterized as an easy task, the

definition of success was actually quite simple: bring three astronauts safelyback to Earth...full stop. In comparison, defining a successful outcomesurroundingtheretirementreadinesseffortissignificantlymorecomplex.

PersonalizingSuccessWhilewehavewell-developedtheoriesabouttheamountofassetsthatneedtobeaccumulated,incomereplacementratios,sustainablewithdrawalrates,andanabundanceofsophisticatedtoolstohelpuscalculatethelotofthem,retirementreadinesswill alwaysbebasedon the individual'sneedsandpreferences...and,boy,isthatmessy.Onesizewillneverfitall.Let'stake,forinstance,theconceptofan80percentincomereplacementratio,

whichisoftenusedasthestandardforhowmuchofone'sworkingincomeneedsto be replaced in retirement. In reality, that replacement ratio is going to varydramatically depending onmany factors, not the least of which is lifestyle inretirement.Thiswas reinforcedmany times in our interviews, but nevermoreclearlythaninourdiscussionwithPaulHenryofLIMRA,anorganizationwhich“provides research, consulting, and other services to insurance and financialservicescompanies,worldwide.”“Oneofthethingswe'vetriedtodowithour‘ReadytoRetire’applicationisto

getpeopletovisualizenotanabstractretirement,butaverypersonalretirementand one that incorporates things that aremeaningful to them today.Andwhatwe'veseenisthatwhenpeopledothatthere'ssortofthislightbulbthatgoeson;there'sthisahamomentandallofasuddentheyrealizethattheyhaveapotentialproblem.”There simply is no single definition of success as it relates to retirement

readiness,andthatmakesitachallenge.Butlet'srevisitJFK'soverallvisionforthe spaceprogram in1961: It toowascomplexand requireda single focus toensureitssuccess.

TheHallmarkofaCivilizedSocietyInourquesttobetterunderstandwhatmightconstituteacommonvisionaroundretirement readiness, we asked our interviewees the question: what defines acivilizedsocietyasitrelatestofinancialsecurityinretirement?Herearejustafew of the many responses we received, the first being one we alreadyshowcasedintheIntroduction:

CharlieRuffel: “At the end of the day, the basic premise here thatwhatfundamentally defines a civilized society is, after decades of work, beingable to retire with financial dignity. That is an absolute hallmark of acivilizedsociety.”

PaulD'Aiutolo:“Ibelieve it'scontinuityofqualityof life.Societyhasanobligationtoensurethat,withtheirhardwork,peoplehaveanopportunitytomaintain their quality of life in retirement.Wedon't have anobligation tomaketheirlifestylebetter,justtopreserveitwhentheycannolongerwork.”ChadLarsen:“Certainlyacentralcomponentofwhatretirementmeansinacivilized society is that you don't have some people in abject poverty andwonderingwherethenextmealiscomingfromandanothersegmentofyoursociety that is not only living in luxury but indifferent to those who aresuffering.”Dallas Salisbury: “A civilized society, when it comes to old age, is theabilityofindividualstospendtheirlateryearswithdignityandasufficientlevel of comfort to be happy that they are alive. That doesn't meanreplacementofpreretirementlifestyle,frankly.Itdoesmeanaroofoveryourhead and decent food on the table and some decent health care, andhopefullytheabilitytohavesomefamilyaround.”Thesimilarityoftheseresponsesisstriking.Noneofourintervieweesbelieved

thatacivilizedsocietyowedanyonea lifeof travel,ofhobbies,or luxuriesofany kind, unlike the marketing messages aimed at making retirement morepalatabletoAmericansinthe1950s.Forourinterviewees,theconceptofwealthdidn'tcomeup,evenonce,perhapsasaresultofhowthequestionwasphrased.Therewerecertainrecurringthemesthatcharacterizedvirtuallyeveryresponseweheard.Theconceptof“financialdignity”wasthemostcommonlyrecurring,with“maintainingonescurrentlifestyle”aclosesecond.Termslike“comfort,”“sufficient,” and “quality of life” were often cited. Andwhile the terms “ourobligation” and “our responsibility” came up often in relation to ensuringeveryonehadafairopportunity,theywerealmostalwaysusedconditionally,anddependent on the recipient having worked hard and made a diligent effort tosave.Thethemeofhardworkcameupoverandover,withaclearmessagethatretirementwasanearnedright,ratherthananabsoluteone.Itwasinterestingtoseethatwhatwascompletelymissingfromthediscussion

was the expectation that a worker's retirement should be dependent on theirhaving made intelligent investment decisions. There seemed to be a generalacknowledgementthatbeinginvestmentsavvyshouldnotdetermineone'sabilityto retire. Inall, thecentralmessageseemed tobe thatwebelieveanyonewhoworkshardandmakesasincereeffortdeservesfinancialdignityinretirement.If,intheend,acommonvisionamongretirementindustryprofessionalsisto

provide financial security for the average American worker who has spent alifetimeworkinghard,collectingapaycheck,andlivingwithinhisorhermeans,arewe—theteam—trulystayingfocusedonthosetasksthatwillmoveuscloserto this end?What does our Command Center look like? Are we focused onmission-criticaltasks,ordowetendtogetdistractedbythosethingsthatsimplydon'tmovetheneedleandwon'tgetusclosertodignityinretirementforthosewhowantandneedit?

TheCurrentCommandCenterLet'slookatthestateoftheunion,bywhichwemeantheteamofprofessionalswho currently work in the qualified retirement plan space, and review theircurrentfocus.The qualified retirement plan industry is a highly technical field with

complicated tax rules, more than its share of compliance requirements, and agreat deal of perceived liability for its many stakeholders. At its core, itrepresents an intersection of the Internal Revenue Code, as amended, theEmployee Retirement Income Security Act (ERISA), as well as relatedlegislation and regulations. It's also a blend of investments, employeecommunications,andhumanbehavior.Sowhoarethesestakeholdersandwhatis their respective involvement in bringing retirement plans to the Americanworker?Everyqualifiedretirementplan—meaningeitheradefinedbenefitordefined

contributionplanthatisqualifiedundertheInternalRevenueCode—startswithaplandocument,whichessentiallygovernstheoperationoftheplanitself.ThisplandocumentneedstobecarefullydraftedtocomplywiththeInternalRevenueCode rules and regulations governing qualified retirement plans and to fit theneedsof thecompanyforwhichit isbeingdesigned.Theplandocumentmustthen be maintained, amending and restating it as required by updates tolegislation, new regulations, and any changes to plan design, to ensure itcontinues tomeet theneedsof thecompanysponsoring theplan.Thiswork istypically done by an ERISA attorney, a third-party administrator (TPA), or abundled-planprovider(recordkeeper)—orallthreeworkinginconjunction—andisincrediblyimportanttotheoutcomeoftheparticipant,sinceitessentiallysetsforth the rulesof theplan (within theconfinesofpermissibility).As such, thecreator has the ability to establish the context of the plan and create powerfulcontextualfactorsthatcandriveparticipantbehavior.

Further,company-sponsoredretirementplans,like401(k)or403(b)plans,arecomplicated and need to provide services far beyond those required by astandalone investment account. An individual investment account serves onlyone investor, is typically offered by a broker-dealer ormutual fund company,often offers a virtually unlimited array of investment choices, and follows asuitabilitystandardofcare,whichessentiallymeanstheinvestmentsheldbyanindividual have to be suitable to that individual's circumstances. In contrast,company-sponsored retirement plans have an additional layer of complexity.Firstofall,theyareheldtoafiduciarystandardofcareunderERISA.Assuch,company-sponsored plans are required to have a named fiduciary (which istypicallytheplansponsororemployer)thathasvisibilityintotheplan,itsassets,andallofitsparticipantsandisrequiredtoactsolelyintheirbestinterests.This,along with other requirements for visibility into assets, annual participantdeposits, participants' annual income levels, as well as requirements tocommunicate with and educate employees on plan participation, places asignificantlyhigherrecordkeepingburdenoncompany-sponsoredplans.Recordkeepers(alsoreferredtoasplanproviders)playtheveryimportantrole

of managing plan data, providing employee and plan communications, andprovidingtheinfrastructureneededtomanageaqualifiedretirementplansothattheplanfiduciarycanfulfillhis/herduties.Since recordkeepers/plan providers often provide communications to plan

participants, they have the ability to shape the message that participants willultimately hear. As such, they have often been relied on to help driveparticipationforplansponsors,advisors,andTPAsbyofferingonsiteemployeeeducation, automatic enrollment programs, web education, employeecommunication,andmuchmore.Allretirementplans,corporateorotherwise,musthaveinvestmentsinwhich

to invest plan assets (typically consisting of participant and companycontributions). Most company-sponsored retirement plans offer a variety ofmanaged investment products as their core plan investments such as: stablevaluefunds,mutualfunds,collectiveinvestmenttrusts,andsub-advisedseparateaccounts.Typically,theroleofprovidingtheinvestmentexpertisetoplansistherole of the investment provider.Often, planswill havemanymutual funds orseparate accounts, representing varying investment styles, from multipleinvestmentcompanies(oftenmutualfundproviders).Although these investment providers may not have direct contact with the

participantandoftendon'tevenhavedirectcontactwiththeplan,theydohave

theabilitytoinfluenceparticipantbehavior.Manyinvestmentprovidersactivelydevelop participant communication materials that can be used by therecordkeeperorplansponsortoencourageparticipantstojointheplan,diversifytheirinvestments,orevenincreasecontributions.Aspreviouslymentioned,corporate retirementplanshavea fairlysignificant

compliance, testing, and administrative burden. In many cases, this burden isshared by the named plan administrator (usually the company sponsoring theplan),whichisalsoreferredtoastheplansponsorandanoutsideadministrator,typically referred to as a third-party administrator (TPA). The company istypicallyresponsibleforinteractingwithemployees,maintainingandprovidingpayrollrecords,andensuringtheplanisofferedtoemployeeswhentheybecomeeligible.TheTPAisresponsibleforthetechnicalaspectsofmanagingtheplan,likethetaxfilings,compliancetesting,designingandmaintainingdocuments,tonamejustafew.Bothcanhavesignificantinfluenceonparticipantbehavior.TPAs are often considered the technical experts for the plan, certainly as it

relates tomatters such as plan compliance, testing, and design.As such, theyoftenhavetheearoftheplansponsorandcanhavesignificantinfluenceonplandesign(bothinitiallyandongoing)andplanoperation.Aspreviouslymentioned,plandesign,becauseitestablishescontextualfactorsthatcandriveparticipation,such as automatically enrolling a participant, can dramatically influenceparticipant behavior. Plan sponsors, because of their close connection to theparticipant, could be one of the most powerful participant influencers, buttypically they are not because of their inclination to remain neutral and letemployeesmakeanunencumbereddecision.

AdvisorsandLawyersSohowdoestheplansponsornavigatethecomplexitiesofhiringarecordkeeper,TPA, and investment providerwhen theymayhavevery little expertise in thefieldofretirement?Oncetheyhaveselectedaprovider,howdotheychooseandmaintain the underlying investments for their particular plan? Who helps toguide theirparticipants in selecting the investments for their accounts?This istypically where the retirement plan advisor steps in. Although the role of theretirement plan advisor varies dramatically according to their own valuepropositionandtheirchoiceoftheaforementionedserviceproviderstheyworkwith,theyoftenserveastheleadrolefortheteamservicingtheplan.Assuch,theycanandoftendoplayaprofoundroleinparticipantbehavior.

Aspreviouslymentioned,qualifiedretirementplansarehighlyregulatedandwhere regulations exist, so does liability, and there is often the need for clearinterpretationofboth.Althoughthereareseveralbodiesoflawthatarerelevantto the retirement plan industry, such as securities and tax law, ERISA is theprimary body of law that governs qualified retirement plans.As such,ERISAlawyers play a significant role in helping to navigate the maze of liability,current and pending legislation, and helping the industry mold currentinterpretation to better serve participants. Many of the newest tools, likeautomatic enrollment, automatic escalation, and qualified default investmentalternatives (QDIAs—tobediscussed inmoredetail in a future chapter) are adirect result of recent legislation and subsequent interpretation by ERISAlawyers.Throughout theprecedingparagraphs,wehavemadereference to regulation,

legislation, compliance, and oversight. Employer retirement plans and policiesdictatingtheirrolerelativetogovernmentbenefitsandothersavingsvehiclesareultimately determined by policymakers, and specifically through federallegislation. However, retirement plans are regulated through a combination oflaw,taxcode,andrulesfromvariousfederalgovernmentagencies.Whilemanydifferent facetsofgovernmentare involved inqualified retirementplans,mostprevalent are: Congress for enacting new pension legislation, the InternalRevenueService(IRS)fortaxqualification,andtheDepartmentofLabor(DOL)for enforcement and participant protection. Since policymakers essentially setand enforce the rules bywhich the entire industry has to operate, they clearlyhavepowerfulinfluenceoverparticipantbehavior.While there aremanyotherparties that servevariouspartsof the retirement

plan industry, the preceding list is meant to broadly outline the primarystakeholders that routinely interact, either directly or indirectly, with planparticipants and plan sponsors. In addition to the aforementioned, there arepassionatelydedicatedresearchandindustryorganizationsthattypicallyoperateasnonprofitsanddoatremendousamountofgoodfortheindustry.Asignificantnumber of our interviewees come from such organizations. There are manyorganizationsthatprovideservices,suchaseducationalmaterials,expertise,andtechnical support to the entire industry. Finally, there are think tanks, tradeorganizations, and events that serve to keep the industrywell informed. It's alargeandcomplexindustrywithmanymovingparts.IfthatisourCommandCenterstaff,arewefocusedonmission-criticaltasks?

Orarewegettingdistracted?

We caught up with Fred Reish, a prominent ERISA attorney and a trueparticipantadvocate,toaskhimwhetherasanindustrywetendtogetdistractedbythosethingsthatultimatelydonotimproveretirementreadiness.Wewantedtoknowwhether,inaworldoffiniteresources,weshouldbefocusedonthosethingsthatreallydriveresults,likegettingemployeestoparticipate,drivinguptheir contribution rates, and increasing financial literacy, instead of being sohyperfocused on investmentmonitoring and perceived employer liability?Didhethinkwecouldstayfocusedontheseimportanttopics?Thiswashisresponse:Not perfectly, but generally. I think there's an old saying that thewheels ofjusticegrind slowlybut exceedingly fine.Andanother thingabout the stockmarket is that in the short run it's a votingmachine; in the long run it's aweighingmachine.WhatImeanisthatintheshortruntherearegoingtobeallkindsofissuesthatwefocuson,butlateron,we'lllookbackatthemanddecidethatourtimewasn'twellspent.Earlyon,plansponsorswereafraidtheyweregoingtogetsuediftheyofferedfiduciaryadvicetoparticipants.Ifyougoback10yearsorso,thatwasabigissue,butitneverhappened.Sowedotendtoheadoffontangents;butoveraperiodoftimewe'regettingitright.Wesometimesdealwithproblemsinthewrongorder.Forexample,inhindsightweshouldhavebeenusingtargetdatefunds20yearsagobutwedidn'tgettothemuntil10yearsafterthat.Sowedon'talwaysdealwiththingsintherightorderandwesometimesgetdistracted from time to time butwith a long enough time horizonwe get itright. Nowwhy?Why dowe get it rightwith a long enough time horizon?Becauseinthefinalanalysis,it'sallabouttheparticipant.The short-run distractions are where we tend to make the issues about us,abouttheproviders,abouttheadvisors,aboutthelawyers,aboutthebroker-dealers or whoever. But then we refocus, because the system ultimately isabouttheparticipantandyoucanonlydenythatrealityforsolong.Wecomebacktoduenorth,andduenorthishowrealpeopleretireinareasonablewayontheir401(k)plansandSocialSecurity.That should be our compass, our lighthouse. We're always going to getdistracted.But,Idon't thinkwegetawayfromit fortoolongorthatwegetawayfromitintoobadaway.Fredisright...onallcounts.Weintheretirementservicesindustrycangetdistractedintheshortrun,butin

thelongerrunwearemovingintherightdirection.Thatsaid,fewwouldargueagainstourneedtoaccelerateourprogress.Buthowmightwedothat?Wehavetorecognizethatinaworldoffiniteresourcesandonewherethereisaneedforimmediateresults,anydeviationfromduenorthburnsvaluablefuel.During our interviews, we were struck by the quality of thought leadership

sharedbyourinterviewees,butperhapsequallyimportantwewerestruckbythepalpablepassionwefelt...ineveryinterview.Ourconclusionwasthatthelackingstateofretirementreadinesshaslittletodowiththecommitmentandpassionofpeoplewithintheindustryknownasthe“401(k)Whisperers,”adedicatedgroupof practitioners who figuratively (if not literally) lay awake at night trying tosolveforthatmasterkeyneededtounlocktheproblemofachievingretirementreadinessforall—peoplewhomwereferencethroughoutthisbook.Further, our interviewees underscore the fact that this issue of retirement

readinessisnotaretirementindustryissueatall,butratheracomplicatedsocialissuethatneedsbroadsocialinvolvementtomakerealprogress.Yetsomehowitseemsas though theheavy lifting isbeing leftup to the retirement industry tofigure it out, as in “figure out new ways to communicate and to change thecontext to make it easier to participate in retirement plans.” Put simply, theretirementservicesindustrycannotdothisalone.Whatisreallyneededisavisionforretirementreadinessthatisbrandagnostic

toserviceprovider,policymaker,andplansponsor.Avision that is focusedontheparticipantandtakesintoaccountthoseaspectsweallseemtoagreeon—inshortthatanyonewhoworkshardandmakesasincereeffortdeservesfinancialdignity in retirement. Wouldn't that be a pretty good place to start for ourcohesivevision?Perhaps.Butbeforewemakethatdecision,letusholdthatthoughtwhilewe

takealookathowthemodernpensionsystemhasevolvedovertimeandwhereitcurrentlystandstoday.

Chapter4

RiseoftheDCPlan

Theprivateretirementsystemwashorrible.Itwaswretched.—TedBenna,“Fatherofthe401(k)”

Castyourmindbacktowhenyouscheduledanappointment,thinkingyouhadallowedplentyoftimetogettherefromanearliercommitmentontheothersideoftown.Yourcarwasfilledwithgas,ithadrecentlybeenservicedand,despitethefactthatyouhadmadethesametripseveraltimes,tobeonthesafesideyouprintedoutthedirectionsandpreprogrammedyourGPS.What,then,wereyourchancesofarrivingatyourdestinationatexactlytherighttime,usingtherouteyouhadusedonpreviousoccasions?Theoddswerealotlowerthanyoumighthaveimagined.Whetherweliketothinkofitthiswayornot(and,asNassimNicholasTaleb

arguesinhisbookTheBlackSwan,thehumandefaultisnot),lifeismoreaboutprobabilitiesthanguaranteedoutcomes.Foolingourselvesthatwearealwaysincontrol often ends up embarrassing us when unexpected delays shred ourbusiness schedules.AsSirFrancesBacon identifiedmore than400years ago,life isa lotmorevolatile,chaotic—andconsiderablylessorderly—thanweareprone to believe it to be. And thinking that we can accurately know what isgoingtohappeninadvanceofitbeingsohascausednoendofdifficultieswhenappliedtothemanagementofdefinedbenefit(DB)pensionplans.InthischapterwearegoingtoexplorewhyitisthatDBplanshavebecomea

significant liability to companies, especially larger ones, and whymany havemovedtheirorganizationsawayfromDBplansinfavorofdefinedcontribution(DC)plans.Much like our hypothetical business appointment analogy, despitethebestofintentions,thepromiseofaDBpensionplanasameansofensuringacomfortableretirementhasbecomeincreasinglydifficultforcompaniestokeep.WewillalsoexplorewhetherdefinedbenefitswereeverreallyubiquitousfortheAmerican worker and if the retirement paternalism of the past was a reality.Finally,wewillexaminetheevolutionofDCplansasthependulumhasswungfrom simplicity to complexity and is now swinging back toward simplicity

again.Beforedoingso,here'sasmalldisclaimer.Whatweareofferingisnotmeant

tobe a comprehensiveor particularlydetailed coverageof these topics.WhilethosewhohaveconsiderablymoreknowledgeoftheevolutionofpensionplansintheUnitedStatesmayraiseaneyebrow(orworse)atoursimplificationofthisissue,thepurposeofthischapterissimplytohighlightwhyDCplansovertookDBplansinpopularityandtobringattentiontomanyofthechallengesaroundretirementreadinessthattheaverageAmericanworkerfacesasaresult.

DefinedBenefitPlansInrecentyears,therehasbeenatremendousamountofdiscussionaboutdefinedbenefit pension plans in both the private and public sectors.The spotlight hasbeenfrequentlyontheissueofunderfundedplans—thisrelatestoaplan'sabilitytomeet its payment obligations to employees and retirees—with the focus ofsuch discussions often resting on the auto giants, airlines, and state and localgovernment pension funds. Occasionally, the conversation shifts from thepossibilityofapensionfailuretoareal-lifeexample.Oneof themost significantpension failures that resulted inover4,000U.S.

workers receiving little or no pension benefits was that of Studebaker, theautomobilemanufacturingcompanythatcloseditsdoorsin1963andterminateditsemployeepensionplan.Studebaker's collapse placed a spotlight on the vulnerability of all workers

withrespecttopensionrightsandrecourse,andhighlightedaneedforregulationandaccountability.Asa result, landmark legislation—ERISA—wasenacted in1974byPresidentGeraldFordwhosaid,“Underthislawthemenandwomenofourlaborforcewillhavemuchmoreclearlydefinedrightstopensionfundsandgreaterassurancesthatretirementdollarswillbetherewhentheyareneeded.”PartofwhatERISAaccomplishedwastoregulatethevestingandparticipation

requirementsofpensionplans,eliminatinganyambiguityastowhowaseligiblefor benefits.As long as an employeemet prestatedminimum age and servicerequirements, they would receive a pension under their company's plan. Inaddition,ERISAestablishedthePensionBenefitGuarantyCorporation(PBGC),agovernmentalbodysetupto“protecttheretirementincomesofmorethan44million American workers in more than 27,500 private-sector defined benefitpensionplans.”DespiteERISA'sprotectivequalities,DBplansstilldependedon

theirunderlyinginvestmentstohelpkeepthemfunded.Sowhathappenstodaywhenacompanyfilesforbankruptcyorcannolonger

meetitspensionobligations?As an employee or retiree of a company in this predicament, you would

receive a formal letter concerning the determination of your pension benefitfromthePBGC.TheletterwouldindicatethatthePBGCwouldcontinuepayingoutbenefitstoyou,aswellasberesponsibleforpaymentsforthoseyettoretire.Thatisthegoodnews.Thebadnewsisthat,underfederalregulations,theyearlymaximum benefit a 65-year-old retiree can receive from the PBGC currentlystands at just under $56,000. This is unlikely to be a reassuring sum to thoselong-standing employees earning ahigher-than-average salary, since it is oftensignificantlylessthantheywouldotherwisehavereceived.ThePBGC ischargedwitheffectively takingoverpension funds that fail. It

meets these obligations by accumulating premiums that Congress determinesmustbepaidbysponsorsofDBplanssothatshouldacompanygobankrupt,acertainportionofemployees'pensionswouldbeguaranteed.Asofthiswriting,accordingtotheirwebsite,thePBGCpaysmonthlyretirementbenefitstoalmost744,000 retireeswho had originally been participants in one of 4,000 pensionplansthatwentunder.WhilethesolvencyofthePBGCisnotatopicweintendtocover,wewouldberemissinfailingtoacknowledgethesignificantstressonthePBGCasaresultofpastpensionfailuresandthoselikelytohappeninthefuture.

HowUnderfundingHappensOn their surface, DB plans seem to be quite simple. They are essentially apromisemadeby a plan to its participants to continue to pay a fixedmonthlyamountinretirement.Why,then,istheresomuchdiscussionaboutunderfundedpension plans? To understand the problem, we need to look beyond thesimplistic accusations of wrongdoing and examine the risks and complexitiesinherent inmaintainingaDBplan,whichserves toexplainwhywehaveseentheshifttotheDCalternative.Essentially,thecompaniesthatsponsorDBplansaretheonesthatfundthem.

Theirpensionliabilitiesrefer totheestimatedcostofpayingoutbenefits toallparticipants in theplan, andpensionassets refer to themoney in theplan thatwillbeusedtopaythoseliabilities.Theconceptofafullyfundedplanispretty

simple:assetsareequaltoliabilities.Ifassetsarelowerthanliabilities,theplanistermedunderfunded,andinthoserarecircumstanceswhereassetsaregreaterthanliabilities,theplanisoverfunded.Sowhatiscomplicatedaboutallofthis?Well,considerthis:sincetheDBplan

promises to pay out an income for a participant's entire lifetime or essentiallydefinesthebenefitatsomefuturedate,alloftheriskformakingthathappeninthe future belongs to the plan sponsor.We are right back to our appointmentanalogy.Similartothewaythatwecanneverpredictexactlywhenandhowwewillmakeitacrosstown,wecanneverknowhowallthevariableswillworkoutwhenfundingaDBplan.Nowletusexaminetheliabilitysideoftheequationandwhatfactorsincrease

a plan's liability, Since most pension formulas rely on length of service andsalary (in some form) to set the actual benefit, the longer that employees aretenured and the higher their salaries, the greater the increase in pensionliabilities. But the real culprit here is longevity. The longer retirees live inretirement,thegreaterthecostofbenefits,whichdrivesupliabilities(thecostoftheplan).Now,howaboutassets?Again,sincetheplanisobligatedtoaspecificfuture

payment,it isdependentontheassetsandassetgrowth(investmentreturns)oftheplantomeetthosefutureobligations.Soinvestmentreturnsaretheprimaryriskontheassetsside.Look at it this way: a plan's liabilities are not fixed but vary according to

multiple factors, including those mentioned above. And a plan's assets aredependent upon investment returns, which are also not fixed. What is fixed,however,istheamountpromisedtoparticipantsonamonthlybasis.What,then,isthebalancingitem,butfunding?Ifaplanhashigherthanexpectedliabilities,say through increased longevity of its retirees but lower than expected assetperformanceduetopoormarketperformanceandlowinterestrates,itsfundingrequirement (how much the sponsor has to put into the plan) rises—perhapssignificantly.Asimpleequationthatrepresentsthefundamentalcostforallplansis:costoveraplan'slifetime=benefitspaid+expensesassociatedwithrunningthe plan–investment income.While costsmay vary year by year according toactuarial assumptions andmethods, in the end, this equation holds true for allplans.Inthepast50years,longevityhasincreased,onaverage,approximately1.75

years per decade and we are all familiar with how investment returns havesufferedrecently.Andtoreallyputthescopeofthisissueintoperspective,some

DBplanshavegrowninsizetoasmuchastwoandeventhreetimesthevalueofthe companies that sponsored them.Managing thebalance sheetvolatility thatresultsfromsponsoringaDBplanhasbecomeamuchlargerdilemma.Again,touse our cross-town analogy, DB plans effectively hit a fire hydrant midtown,meaningmostareunderfunded.Somuchsothatmanycompanieshavefrozenorterminated theirplans in favorofdefinedcontributionplans,becausewithDCplans the funding requirementsaremorepredictableand the investment risk iseffectivelyshiftedtotheparticipant.

TheDefinedBenefitMythAsweoutlinedinChapter2,DBplansbegantomushroomincorporateAmericaduring the middle part of the twentieth century. According to the EmployeeBenefitResearchInstitute(EBRI),between1940and1960thenumberofpeoplecovered by private pensions increased from 3.7 million to 19 million,representing almost 30 percent of the labor force. By 1975, according to theDepartment of Labor, some 103,000 plans covered 33 million people in thiscountry. Today, those figures look a little different. While the number ofAmericans covered has remained just north of 40million, the number of DBplansstandsatjustover47,000,andthatnumberissteadilydeclining.ButwhiletheoverallDBmarketisdeclininginnumbers,onesegmentofDBplansisstillgrowing. Small business owners, who realize they need to save more forretirementthantheamountpermittedinaDCplan,areturningtoDBplansfortheirhigherdeferrallimits.It is important to note that being covered does not mean that a person has

actuallyearnedabenefitbutonlythattheyarecoveredintheeventthattheystaylongenoughattheircompanytobevestedandbeentitledtofuturebenefits.AsanemployeeofacompanywithaDBplanyouarelikelyacoveredparticipantondayone.However,DBplansaresetupwithavestingscheduleandusuallytake five years for a participant to become vested and to be entitled to theiraccrued benefit payments at retirement. Unfortunately, many employees don'tstaylongenoughwithacompanyforthattohappen.Acommonmythwithrespecttoretirementplansisthatinthegoodolddays

peopleworkedforacompanyprettymuchfortheirwholelives.Theprevailingbelief is that, in exchange for long-standing loyalty, paternalistic employersprovided generous pension schemes so thatwhen their employees retired theyneverhadtoworryaboutretirementincome.

Theheydayof the traditional,definedbenefits eramakesyou long for thosedaystocomeback,doesn'tit?Exceptthat,onthewhole,theimagethateveryonewascoveredbyaDBplan turnsout tobemoreofamyth than reality.Aswepointed out in Chapter 2, even though the first corporate pension plan wascreated for employees of the American Express corporation in 1875, and theconceptbegantobemorewidelyadopted,by1932only15percentofAmericanworkershadaccesstosuchplans,withonlyasmallpercentageofthoseactuallyreceivinganypayments.Fast-forward to the latterhalfof the twentiethcenturyand theexperienceof

EBRI'sNevinAdams,asjustoneexample.Heworkedforhisfirstemployerfornineyears andwas aparticipant in the company'sDBplan.Whenhe left thatfirm,hisyearsofserviceresultedinnobenefitatall,becausetheplanrequiredemployeestostaywiththecompanyfor10yearsbeforetheyvested.Thatwasarelativelyshortvestingschedulecomparedtoearlierpensionplanswherelongervestingschedulesofbetween15and30yearsofservicewerethenorm.Nevincontinues,“Iwaswithmysecondemployerfor13yearsandearneda

benefitthere,butdidn'thavetheoptionofalump-sumpayout.So,whenI'm65,IthinkI'llbeentitledtoapensionofjustover$200amonth.”That is not much to celebrate after a total of 22 years service with two

employers,bothofwhomofferedtraditionalpensionplans,wouldn'tyouagree?TedBennaadds,“Wetendtobeverycriticalofourprogressingettingpeople

ready for retirement.There is thisbroadlyheldmisconception thatweused tohavealotbettersystemthanwedonow.Therealityisthatthissimplyisn'ttrue.I mean, going back to when I started in this business, the private retirementsystemwashorrible. Itwaswretched.Thiswaspre-ERISAand, togiveyouaspecificexample,Iworkedinthehomeofficeofaninsurancecompanyandtheyhadadefinedbenefitpensionplan.Tobecomeaparticipantinthatplan,youhadtobe30ifyouwereamale,35ifyouwereafemale,andyouhadtostayuntilyouwereage60beforeyouhadanyvestedbenefit.Thatsimplywouldn'tworktoday.”Partofwhatmakesthismythseemsorealisticisthatweareallconvincedthat

back in the day most people worked their entire lives for just one or twocompanies.Whileit'spredictedthattheMillennialswillhaveupto10careersintheir lifetime, the cohort preceding the Baby Boomers (known as the SilentGeneration, those born between 1925 and 1945) were thought to stay in onecareer,withoneemployer,prettymuchthewholeoftheirworkinglives.So,asthelorewouldhaveit,theaverageAmericanworkedatajobfor30-plusyears

then was compensated with a relaxed retirement, funded by an ironclad andgenerousmonthlypensioncheck.Butthejobtenuremythalsocrumblesonceyouscratchthesurface.According

toEBRI'sPresidentandCEO,DallasSalisbury,“Medianjobtenurehaschangedverylittleoverthepost-WorldWarIIera.Itwouldlikelysurprisemanytolearnthat the median job tenure of about five years has remained consistent, evenwhenwereachallthewaybackto1952—some60years.”Thisdirectlyrefutestheconventionalwisdomaboutlifetimeemployment.AsNevinAdamsexplained,“Whenpeople thinkaboutdefinedbenefitplans

asapremiseandastructureIthinkpartoftheproblemistheylookbacktotheirchildhood as being veryLeave It toBeaver idyllic. But the truth is, everyonedidn't have a pension. Most people never worked long enough, even if theircompanyprovidedapensionplan,forthemtoaccumulateanysortofsignificantbenefit.”Wemake thispoint,not toundermine theperceivedvalueofdefinedbenefit

plans,but rather tobringsomebalance to thediscussion.Thoseofuswhoareluckyenough tohaveanaccruedbenefit ina traditionalpensionplanareveryfortunate indeed,because thismeanswehave thebenefitof lifetimeincomeatretirement,abenefitwewillnotoutlive.Thesimplepointwearemakingisthattheproblemsofcoverageand theaccruedbenefitarenotnew issues,buthavebeenpresentsincetheinceptionofthepensionplan.Forthosewhodidstaywithonecompanyfortheduration,therewasmuchto

commendDBplans. JohnCarl, president ofRetirementLearningCenterLLCtoldushowhisfather,afterreturningfromfightinginWorldWarII,maintaineda long career atwhatwas formerlyWesternElectric and later becameLucentAlcatel.“Theonly thing (myfather)had todo toaccruehis retirementbenefitwas show up towork. He didn't have to think about it. He didn't have to doanythingelse.”ButtogetlulledintobelievingthatMr.Carl'sexperiencewasthenormwouldbetosuccumbtorevisionisthistory.

TheRiseofDefinedContributionPlansWhatfollowsisnotmeanttobeacomprehensivehistoryoftheriseofdefinedcontribution (DC) plans. We acknowledge the contribution of landmarklegislation—includingtheEconomicGrowthandTaxReliefReconciliationAct(EGTRRA)of2001that introducedtheSaver'sCredit,amongother initiatives,

and the Pension Protection Act (PPA) of 2006 that contains safe harbors forauto-planfeatures—thatarediscussedlaterinthisbook.However, it isbeyondourscopetogivethemmorethanabriefmention.Formorein-depthcoverage,the Investment Company Institute report entitled 401(k) Plans: A 25-YearRetrospectiveisavailableonline(seetheBibliography).Suffice it to say that with respect to the earlier DB plans, the increasing

demandoffundingwaslargelyresponsiblefor theirdeclineinpopularity,withDCplanstakingtheirplace.WhatfurtherfueledthemigrationfromDBtoDCplanswasasectionoftheRevenueActof1978statingthat,“employeesarenottaxedon theportionof income they elect to receive asdeferred compensationratherthanasdirectcashpayments.”TedBenna,wholaterbecameknownasthe“fatherofthe401(k),”workedwithTreasuryregulatorstopavethewayfortheadventofthe401(k)plan.By 1981, the Internal Revenue Service (IRS) had proposed regulations on

401(k)plansthatsanctionedtheuseofemployeesalaryreductionsasasourceofcontributions toward saving for retirement.Yet the401(k)wasnevermeant tobecometheprimarymeansofsavingforretirement.Perhaps bolstered by the bull markets of the 1980s and 1990s, individuals

welcomed the opportunity to reduce their tax liabilities and supplement theirretirement savings. Indeed, the 401(k) opened up many new choices andfreedoms to which the average American worker had not been exposedpreviously.Theynowhadmorecontroloverthefundsintheirretirementplan,includingthefactthat,unlikedefinedbenefitplansinwhichassetsremainwiththecompany,401(k)planswereportable.Workerscouldtaketheirown401(k)assetsplusanyvestedemployercontributionswiththemastheymovedfromjobto job, giving them greater flexibility to make changes in search of careeradvancement or higher salaries without the fear of losing their accumulatedretirementbenefits.Thecreationof401(k)planswasseenbybothemployersandemployeesasa

win–win.ThenumberofplansgrewtotheextentthatEBRI'sHistoryof401(k)Plansreportfrom2005stated,“Withintwoyears...nearlyhalfofalllargefirmswere either already offering a 401(k) plan or considering one.” Some of thatgrowth came from companies that froze their existing DB plans and beganofferingonly401(k)planstotheiremployees.Thegreatestimpact,arguably,thatthis new approachmadewas to a broader coverage of retirement plans in theworkplace.AsBrianGraff,CEOof theAmericanSociety of PensionProfessionals and

Actuaries(ASPPA)pointedout:At least now [the average American] has an opportunity to save that theyneverhadbefore.The401(k)has insomeplacesbeenareplacement for thetraditional defined benefit plan, but frankly it has opened up retirementsavings to a huge section of the economy that didn't have that opportunitybefore, principally in small midsize companies. Those people never had adefinedbenefitplan.Now,atleast, theyhavearetirementplanthatprovidesthemwithameaningfulopportunitytosave.Thatbeingsaid, it is importanttonotethattheadventofthe401(k)plandid

notactuallyreducetherisksoutlinedaboveinconnectionwithDBplans.Allofthe challenges of reaching a funded DB plan continue to exist for DC planparticipantsinthedefinedcontributionera,aswediscussnext.

ChangedResponsibilitiesDespitetheadvantagesofportabilityandcontrolthat401(k)plansoffered,canwe really say with any certainty that all participants fully realized theresponsibilities that came with them? After all, employees are now not onlyfacedwith shouldering theburdenofdecidingwhether toparticipate in aplanand if so, at what level, they are also tasked with making wise investmentchoices.TheprimaryDBplanchallengesofmanagingtheassetsandtheliabilitiesof

the plan in order to keep funding levels high enough to pay for future fixedbenefits morphed when applied to DC plans. Remember, one of the mostimportantdistinctionsbetweentheDBplanandaDCplanisthatwhiletheDBplandefines thebenefit (i.e., theamountpaid to theretiree), theDCplanonlydefines the contribution (i.e., what the participant and employer pay into theplan).So,asaparticipant ina401(k)plan,youdecidehowmuchyouwillputinto the plan on a per paycheck basis—which is typically augmented by anemployermatchorprofitsharingcontribution—andthenyouhavetodeterminehow you will invest those assets, resulting in either good or poor assetperformance.Basedon those twodecisions—howmuchyoupay inandwhereyou invest—you ideally end up with an account balance at retirement thatoutlivesyou.But thathingesonknowinghow long that retirementperiodwilllast—somethingthatnoneofuscansayforcertain.

LongevityOneof the primary differences between aDB andDCplan is that the risk ofliving too long is shifted from the employer to the employee.While thinkingaboutwhenyouarelikelytodieisnotatopicmostofusliketoaddresshead-on,it's importantwhen considering howmuchwe need to accumulate in order toretire.Inthe1950s,whenpensionplanscoveredroughlyaquarterofallemployees

working for big firms, the average 65-year-old retiree could expect to liveanother13.9years.Providingalifetimeretirementincomeforanemployeebackthenwasarealisticgoalformostcompanies.However,todaya65-year-oldmanhasa40percentchanceoflivingtoage85anda20percentchanceoflivingtoage90.Anda65-year-oldwomanhasa53percentchanceof living toage85and a 31 percent chance of living to age 90. For a married couple, then, thechance of one of the spouses living longer than their life expectancy issignificant.Giventheshiftinresponsibilitiesfromemployerstoemployeeswithrespectto

retirement readiness, we are now asking individuals—who have perhaps onlystartedtofundtheirretirementintheirlatethirtiesorfortiesandhavetakenahitontheirsavingsbecauseoftherecentvolatilityofthestockmarket—toplanforthevariabilityintheeventthey(ortheirspouse)livetobe90orevenolder.Andwe are largely doing this without educating the averageAmerican on how topooltheirlongevityrisk.Whenyoulookataveragelifeexpectancy,thatfigureisbasicallyuselessfor

making any sort of informed decision about retirement, except at a verysuperficial level.AsJayVivianpointedout,“Wehaveeverybodywishing thattheycouldretireat55andliveto90.Wait,letmegetthisstraight—you'regoingtostartworkingat20,andworkfor35years(untilage55)andthenberetiredfor35years(age90)?Thatmodelwon'tworkunlessyou'regoingtosaveahugepartofyourpay!”Planning for an average life expectancy is fraughtwith problems, continues

JayVivian:“Let'ssaysomebodydoeslookuptheactuarial tablesandrealizes,oh,I'msupposedtolivetobe86.SoI'dbetterfigureoutmyspendingsothatmymoneywilllastuntilI'm86becausethat'smylifeexpectancy,right?Well,that'smymedian life expectancy. So, if I planmy spending somymoney runs outwhenIturn86,thatmeansthatforevery100peoplewhodowhatI'mdoing,halfofusaregoingtohavetoeatcatfood.Andtheotherhalfaregoingtodiewith

toomuchmoney.”One answer, at least for some, might be to pool that longevity risk with a

productsuchasanannuitywheretheriskdoesn'tgoawaybutgetsredistributedamongeveryoneintheplan.Thebenefitofanannuityisthatifyouareplanningfor a lifetime of, say, 86 years and you actually live to be 100, you get 14additionalyears—noneoftheminvolvingmakingthechoicebetweenhealthcareanddinner!Likelifeinsurance,theadditionalbenefitsdrawnbythosewholivelongerthantheaveragearecoveredbythosewhodonot.Theironyis,most401(k)shadannuityoptions.Whenyoucametoretireyou

were typicallyoffered a lump sum to invest asyou saw fit, or an annuity thatmeant you would get a set amount every month for the rest of your life.Unfortunately, given that annuities are conservative, low-yielding investments,fewpeoplewantedanythingtodowiththemduringthebullmarketyears.That,coupled with requirements for additional paperwork and signatures, causedmanycompaniestosimplystopofferingtheannuityoption.Yetannuitiesarebynomeanstheonlysolutionto theriskofoutlivingone's

income. The fact is, the evolution of the 401(k) has been largely driven bydemandand,untilrecently,therehasbeenlittledemandforanythingotherthanalump-sumpayoutfromtheseplans.Butaslifeexpectancieshaveextendedand401(k)s have taken on a more significant role in the retirement readiness ofAmericans, the demand for a solution to the longevity risk quandary hasincreasedandnewsolutionsarebeingputforward.AsBrianGraffpointedout:“Ithinkannuitiesdefinitelyhavetheirplace,but

I'm not necessarily saying it has to be an annuity. There are lots of creativethings thatwecando,butwedon't.That'sbecauseDCplanshave reallybeendesignedtoaccumulateassets,nottogivethemaway.”So,ifwenowliveinatimewhenvoluntarysavingscoupledwithmandatory

Social Security are meant to prepare us for retirement, and participants, notemployers, need to make important decisions regarding funding, investments,andprotectingagainstlongevity,howhavevoluntaryworkplaceretirementplansevolvedtobetterserveus?

TheEvolutionof401(k)The early 401(k) planmarketwas a far cry fromwhat it is today.Most plansoffered few investmentchoicesand limitedability tomovebetween them.For

example, Section 404(c), which was added to ERISA on October 13, 1992,offered employers relief from the liability that resulted from their employees'investmentselectionsiftheyfollowedsetguidelines.Theseguidelinesincludedoffering employees aminimum of three investments with varying risk/rewardcharacteristicsandtheabilitytoshiftbetweenthemonaquarterlybasis.Today,whenaccountsareweb-basedandtradeddaily,andinvestmentchoices

can be virtually unlimited, a planwith only three investment choices and theabilitytotradeonaquarterlybasiswouldbearealdinosaur.Plansponsorsnowhave investment policy statements, investment due diligence processes, andcommittees that make decisions about which investments to include in theirinvestment menus. And today, participants enjoy flexibility and control overtheirinvestmentslikeneverbefore,butallofthisisweighedagainsttheaverageAmericanhavinginsufficientfinancialknowledgewithwhichtomakeinformedinvestmentdecisions.Adding to thatchallenge, let's factor in thequestionofwhetherhavingmore

choices is actuallybetter for the averageparticipant.Research indicates that iftheaverageworkerisgiventoomuchchoicetheysimplyfreezeorarelikelytomakepoordecisions. It'sadocumentedphenomenon thatas investmentmenusextendbeyondamanageablenumberofchoices,thequalityofdecision-makingis negatively impacted. Increasingly, recently hired participants are gravitatingtoward one-stop target date investments, indicating their preference forsimplicity. This phenomenon is discussed further in Chapter 7. As ShlomoBenartzipointsoutinhisbookSaveMoreTomorrow,mostpeopledon'twanttheresponsibilityofmaking thesortofcomplex financialdecisions that theyhavedifficultyunderstanding,letalonemakingwithanydegreeofconfidence.AccordingtoJohnMottofMorganStanleySmithBarney:Forsolong,therehasbeenacertainportionoftheoldergenerationthathasbeenused tocompaniesdoing things for them,andI think it's takinga longtime for them toget to thepointwhere they know theyneed to take careofthemselves.What'sinterestingtomeisthatwehadthis1960sgenerationthatstarted the revolution,whowanted todo everythingon their ownandbe incontrol, but when it came to their finances—which is one of the mostimportant parts of maintaining your lifestyle—most refused to want to dealwiththatforsuchalongtime.Yet, in their defense, we have to say that it is hardly surprising that most

peoplearenotengagedwiththetopicofretirementreadinessandfindtheactof

investing (which retirement planning has evolved into, rather than simplysaving)tobeintimidating.Thankfullywearenowseeinganincreasingcallforautomaticplanfeaturesandforthependulumtoswingbackfromcomplexitytosimplicity.Ratherthanaskingpeopletochoosewhetherornottojoinaplanandwhereto

invest their accounts, there is a growing belief within the retirement planindustrythatchangingtoauto-enrollmentanddefaultingassets intoanage/riskappropriate investment is theway to go—two of the topicswe cover inmoredetailinChapter7.Thismeansthatemployeesaredefaultedintobehaviorsthathave a higher probability of retirement readiness.Consistentwithmaintainingflexibility and personal choice, thosewhowish to take onmore responsibilityand venture outside of the defaults are still free to do so and have ampleinformationandguidancetohelpthemmakeinformeddecisions.Just let's not blame the 401(k) system or claim—as some do—that 401(k)s

have failed.According toMikeDiCenso, the overall structure, administration,andrecordkeeping,eventheinvestmentsideof401(k)sarenotwhathasfailed:“The individual participant's education, knowledge, and their proactiveutilizationoftheplan—that'swhat'sfailed.”Whatifwetookfinancialliteracymoreseriouslyinordertohelptheaverage

Americanbetterunderstandhowmuchtheyneedtosaveandwhatitmeansforthemwhentheydoretire?Mightwethensolvetheretirementreadiness issue?Thesearethequestionsweexplorenext.

Chapter5

FinancialLiteracy

The number one problem in today's generation and economy is the lack offinancialliteracy.

—AlanGreenspanSantiagoMartinez(nothisrealname)andhisspousehavetwochildren,aged3and15.Theircombinedannualincomeis$25,000,anaveragefigurefortheareaofTexas inwhich they live.Eachmonth theymustcover theirapartment rent,insurance,carpayment,plusthingslikecellphone,food,andcable.Whentheirteenagesondecidestosneakoutwiththefamilycartogotoapartyandcrashesit into a tree, theyneed to find $150 to pay the local hospital for his stitches.Aftersomediscussion,Santiagorealizeditwasn'tworthclaimingthisrelativelysmallamountonthefamily'sinsurancesinceitwouldonlyraisetheirrates.Bypickingupafewextrashiftsatworkhewasabletomakeenoughtocoverthatunexpectedcostandaddanextra$50tothemoneythefamilytriestosaveeverymonth.Santiagoisreallyonly18yearsoldandthisisn'treallifeforhim,butitsoon

couldbe.He is a studentparticipant in apersonal financegamedevelopedbyMathew Frost, who teaches American history and economics to eleventh andtwelfth graders at SunsetHigh School inDallas,where the 2200 students arelargely Hispanic. In college, Mathew had been exposed to a similar gamedevised by one of his sociology professors. So when the state legislature inTexas determined that personal finance was to be incorporated into the highschool curriculum,Mathew took the basics of his former professor's idea andturneditintoahighlyinteractiveclassroomexperience.The game works like this. Each student is hypothetically paired up as a

marriedcoupleonanannualincomethatmatchestosomedegreethecommunityinwhichtheycurrentlylive.Theystartoutwithtwochildrenbutcouldendupfacing another pregnancybefore the game is over. Similar to theway that theboard gameMonopoly incorporates Chance and Community Chest cards, thestudent teams pull cards representing random life events—good and bad.One

month theymight face a rent increase, on another theymight get a bonus atwork.A relativemightdie and leave thema small inheritance,oroneof theirchildrenhas a birthday and asks for aNintendoWii.There is also awon-the-lottery card that only one lucky participant has pulled in the four years thatMathewhasbeenofferingthiscourseaspartoftheeconomicscurriculum.Thewinninggroupistheonewiththemostmoneysavedattheendofthe12

cycles (one cycle representing each month of a year, although the exerciseextendsoverjust6weeksofthe18-weeksemester);winnersarecertainlyneverindebt.On one occasion, a team whose annual income had been set at $22,000

managed to at least save something because they had researched a federalprogram—TemporaryAssistanceforNeedyFamilies—andfoundthattheywereeligiblefor$1,500worthofmonthlybenefits.ItisthiskindofpersonalinitiativethatMathew Frost looks to develop in his students, in addition to persuadingthemtosavesomeofthemoneytheyotherwisewouldhavehadtofindforfood,healthcare,andotherfamilycosts.Stressing a point that was made to us many times by various retirement

industryexpertsweinterviewed,Mathewaddsthat,“Somefamiliesinthegame—likeSantiago's—thatmakelessmoneygenerallydobetteratsavingthanthosewithmiddle-class incomeswhowillspendwhat theyhaveand thenfindwhentheypullacardforaneventthattheywerenotexpectinghavenothingsetasidetocoverthat.”IsMathewFrostmovingtheneedlewithrespecttopreparinghisstudentsfor

the financial challenges theywill soon face in the realworld?Absolutely.Heknowsthatstandinginfrontofhisstudentstalkingaboutopportunitycostsandothertermsfavoredbyeconomistsisjustgoingtoturnofftheseyoungpeople.Sohe engages thememotionallywith a true-to-lifegame that helps to capturetheir imaginationsandprovokes initiative.At its core,his approach isn't aboutfilling their headswith context-independent information that they'll forget in aheartbeat,it'saboutdevelopingcriticalthinkingskillsthatwillhelpthemmakegooddecisionsovertime.Mathew's game also instills in students the confidence to see that financial

acumen is something they can easily acquire and further develop. In short, hehelpstochangetheirbeliefs.Whathefaces,however,isoftenanuphillbattle—notleastfromalackofparentalguidancearoundsaving.On thehomefront, forexample,oneofhis femalestudentswasbeinggiven

$100aweekallowancefromherfather.Sinceshewasplanningtogotocollege,

Mathew asked her if she was saving any of that money (a not insubstantial$5,200ayear).Shebegantodoexactlythat,untilhermotherfoundoutthatshewas saving themoney insteadof spending it and that allowancewas suddenlycutback.Whatmessagedoesthatsend?Time is also an issue for teachers like Mathew, who are caught between

teachingacoursethatwillimpactthefinancialdecisionsthesestudentsmaybemaking in just a few months' time and other required coursework. But, thenagain, is there ever enough time in the school year to accomplish all that wewouldideallywant?WithrespecttoMathewFrost'sotherteachingsubject,forexample,he'sgiven36weekstocover280yearsofAmericanhistory.Duringthefirstyearthatpersonalfinancewasintroducedintotheeconomics

curriculuminMathew'sschool, thecourselastedjusttwoweeks.Nevertheless,that'san improvementon theone-hourworkplaceenrollmentmeetings thatareoftenthefirstopportunitymostAmericanadultshavetothinkaboutbudgetingand saving for retirement. But, as Joe Mrozek shared with us, “It is beyondcomprehension that today, inAmerica,we don't do a better job of prioritizingfinancial literacy in our schools. Neither my 17-year-old nor my 12-year-oldtwinshavebeenexposedtothiscriticaltopicinschoolinanymeaningfulway.Howisthatpossibleinthisdayandage?”Joeisabsolutelyright;wehavetodobetter.

DefiningFinancialLiteracyLet'sstartbyaddressingwhatwemeanbyfinancialliteracy.To our interviewees in the retirement industry, the definition of financial

literacy as it relates to retirement readiness means going beyond simplebudgetingbutnotasfarashavingtoknowtheintricaciesofstocksandbonds.What it definitely involves, in their minds, is the need for people to knowenough about their retirement savings and other financial matters in order tomakegooddecisionsovertime.As Nevin Adams pointed out—and the reason why he feels that the auto-

enrollment approach by itself is not the answer—retirement decisions are notsingleevents,likebuyingahouse.Whenyouaremakingahousepurchase:...hopefullyyou'rebringingonpeopleandhiringatacertainlevelofexpertiseand they're helping you get through the morass so you make the right

decisions.Thenyou'redonewithit.You'vegotyourhouse,you'repayingyourmortgage,andthat'sitforthetimebeing.Theproblemwithretirementdecisionsisthatyoudon'tjustdoitonce.Ithinkwe could absolutely teach everybody in America to make that first goodinvestmentsavingsdecision.Thechallenge is,howdoweget themtorevisitthatfirstgooddecisionanddoitonaregularbasis?Thereisnodoubtthatfinancialliteracyandretirementreadinessarestrongly

correlated, as identified in studies conducted globally by Annamaria Lusardi,Directorof theGlobalCenter forFinancialLiteracyat theGeorgeWashingtonSchool of Business. Echoing the quote by Alan Greenspan that opened thischapter, Lusardi points out: “Just as it was not possible to live in anindustrializedsocietywithoutprintliteracy—theabilitytoreadandwrite—soitisnotpossibletoliveintoday'sworldwithoutbeingfinanciallyliterate.Tofullyparticipateinsocietytodayfinancialliteracyiscritical.”Butachievingfinancialliteracyisnotjustaboutaccesstomoreinformation.It

isaboutknowingwhattodowiththeinformationyouarepresentedwith.Which brings us back to the concept of critical thinking, defined by the

National Council for Excellence in Critical Thinking as: “...the intellectuallydisciplined process of actively and skillfully conceptualizing, applying,analyzing, synthesizing, and/or evaluating information gathered from, orgeneratedby,observation,experience,reflection,reasoning,orcommunication,asaguidetobeliefandaction.”Anyone familiar with the classification of educational learning goals and

objectives known as Bloom's Taxonomy will recognize that critical thinkinginvolves higher levels of cognition than simply being able to remember orsummarizefactsandfigures.Atitsculmination,criticalthinkingistheabilitytojudgeinformation,determineyouroptions,andgiveweight toonechoiceoveranother. It is one thing to remember and understand the information youmayhavecomeacrossaboutsavingsingeneralorretirementreadinessinparticular—through initiatives ranging from Feed the Pig to the National RetirementPlanningCoalition'sRetire on Your Terms. It's quite another thing to evaluatethat information in order to create a personalized savings and retirement planthatworksforyourlifeanduniqueneeds.Wedon't need to be trying to educate people to the elevated level that Paul

D'Auitolodescribesasbeyondthecapabilitiesevenofthosewhoworkgenerallyin the retirement services industry: If you lookat institutional consultingat its

core, all those pools of money are historically run by very sophisticatedinvestment committees that have tomake choices on asset allocation, have tomake choices onmanagers, have tomake choices on a lot of different things.Whatwe've done in asking the average participant to fund their own pensionplan is to expect them tohave skills that are the equivalent of an institutionalconsultantpairedwithasophisticatedinvestmentcommitteeinordertomaketherightchoices.It'sasininetothinkthatanyparticipantcandothat.In a sense, the issue of retirement readiness is no different to any of the

ongoingchallengeswehaveinaworldinwhichitmakeslesssensetofocusoureducationaleffortsonwhat(asincrammingheadsfullofinformationthatmaybeirrelevantorinaccurateveryquickly),andrequiresagreaterfocusonhelpingpeoplefindtheirownanswerstowhyandhow.KentCallahan,CEOofTransamericaEmployerSolutionsandPensions,adds:

People focus on things that are important to them when they're important tothemandnotbefore.A21-year-oldisnotgoingtospendalotof timethinkingaboutretirementreadiness.Buta35-year-oldwith$41,000inhisaccountisnowgoingtoengageandspendmoretime.Ashissavingsgrow,itbecomesmoreandmore important and that's when he will begin to pull information from thesystem.Soweneedtopreparepeopleforthattime,bygettingtheirsavingshabitstarted, by teaching them the basics of saving and investing, and by teachingthemtothink.Atleastthen,whenthey'rereadytopullwhattheyneed,theywillactuallyunderstandit.Unfortunately,thefirstexposurethatmostpeoplehavetoanykindofpractical

planning for retirement is during the workplace one-hour enrollment meetingwhich,formanyofus,istoolittletoolate.Whichbringsusbacktoneedingtodomoreinthehomeandinourschools.In January 2008, President George W. Bush established the President's

Advisory Council on Financial Literacy with the mission “to promote andenhancefinancialliteracy”withaviewto“helpkeepAmericacompetitiveandassisttheAmericanpeopleinunderstandingandaddressingfinancialmatters.”President Obama then signed an executive order creating the President's

AdvisoryCouncilonFinancialCapabilityinJanuary2010,againwiththeaimofhelpingAmericansmake“informedfinancialdecisionsandtherebycontributetofinancialstability.”PartofwhatthisCounciladdressesare“newapproachestoincreasefinancialcapabilitythroughfinancialeducation....”Were you aware of either of these initiatives before now? Have any young

people youknowbeen exposed to a booklet entitledMoneyAs YouGrow: 20Things Kids Need to Know to Live Financially Smart Lives, containingsuggestions foractivities thatparentscanengage inwith their childrenat age-appropriatemilestones,forexample?Wasanyoneyouknowoneof the84,372studentsfrom1,692publicschools

whoparticipatedinthe2011NationalFinancialCapabilityChallenge?Shouldn't italarmusthataccordingtotheCouncilforEconomicEducation's

SurveyoftheStates:EconomicandPersonalFinanceEducationinOurNation'sSchools 2011 report, the trend toward teaching these critical life skills “isslowingandinsomecasesmovingbackwards.”Consider that in 2012, less than half ofAmerica (22 states—up from 21 in

2009)requireshighschoolstudentstotakecoursesineconomics,andfewerstillrequire those students to be tested in that subject.Even fewer states (14—onelessthanin2009)requireschoolstoofferacourseinpersonalfinance.The majority of today's college seniors are graduating with an average of

$25,250inschoolloandebt,yetmanyofthemwillneverhavebeenexposedtothe commonsense advice outlined in the booklet Money as You Grow. Theconceptofwaitingbeforeyoubuysomethingyouwantinordertofirstcoverthethings that you need is also a key issue that Mathew Frost inculcates in hisstudents.Butthereisanotherissueweshouldnotoverlook,andit'sonethatweraised

with our interviewees:Who is qualified to teach personal finance in schools?Less than 20 percent of teachers report that they feel competent to teach thistopictotheirstudents,whichmayreflectthefactthattheaverageAmericanissopoorly prepared in this regard that fewer than half of us (49.7 percent) knowwhatismeantbythetermbudgetdeficit.Luckily that isnotaproblemfor thestudentsaccessing thepersonal finance

course at Sunset High School in Dallas, Texas where Mathew Frost teaches.Frosthasastrongsenseofpersonalresponsibilitywhenitcomestofinanceandcan articulate this to his students. After graduating from college in 2007, hestartedworkasadataprocessorforamutualfundcompany,beforegivingwayto his passion and entering the teaching profession.Not only that, but he hasclearlymanagedhisownmoneywell—fromthetimewhenhisparentsrequiredhimtoearnhisownmoneyfromcuttinggrassinordertobuyhisfirsttelevisionset,tosavingasetamountfromhisteacher'ssalaryeverymonthinaretirementplan.

Sohereisanotherquestion:Whatopportunitiesmighttherebeforthe401(k)Whisperersintheretirementandfinanceindustriestoteachthetopicofpersonalfinance and retirement readiness? In which case, public and private schoolteachers don't necessarily have to try to learn and understand all that theseindustryexpertsalreadyknowfromyearsoffirst-handexperience.At its core, this issue pivots around something Chad Larsen pointed out—

which is contrary to howmost curricula is developed: I knowwhat they don'tneed toknow.Tobe financially literateandretirementreadyyoudon'tneed toknowthedifferencebetweenlarge-capandmid-capstocks.Idon'tthinkanyoneneeds to know the difference between Treasury Inflation-Protected Securities(TIPS)and intermediate-termbonds.What theaverageAmericandoesneed toknowaboutandfocusonistheamountoftheircontributiontoaretirementfund.That's what's going to have the greatest impact on their ability to retire, notwhethertheypickedtherightfundorthewrongfundorallthosethingsthatwespendthevastmajorityofourtimeon.Of course, as Ted Benna commented to us, even if we were able to get

agreement on this, we would need to address the issue of “What kind ofconsistency might you have?” But that is focusing on the tactical stuff ofcurriculumdevelopmentandneeds toplayasecondaryrole to thestrategicallyfocused outcomewe are all looking to achieve: a nation of financially literateindividualswhonotonlysecure theirownfuturesbutcontribute to theoveralleconomicsecurityandfunctioningofAmericansocietyovertime.

MakingSavingStickSo,giventhatthisbookismoreaboutaskingtherightquestionsthanprovidinganypatanswers,letusaskyouthis.Asaneducator,industryspecialist—orasaparent—what perspective do you have about how to improve the reach,standards, and life-long impact of financial literacy through the teaching ofpersonal finance courses in our schools (and for more on this issue, see theLetterstoStakeholdersinChapter11)?In a fast-paced, ever-changing world, the average American needs to know

enoughtomaketherightfinancialdecisionsattherighttime,accordingtotheirindividual aspirations and needs. And we need to make that learningpalatable...in the same way that Mathew Frost is doing for his students. Hedescribeswhattheytakeawayfromhiscourse:Wetalkaboutmakingabudget

andthenwegotothegameandtheyhavetomakeabudget.Andtheyhavetodothisforeverymonthoftheyearsoit'srepeatingthelessonoverandoveragain.Andthenwetalkaboutinvesting,whentheygettheoptionofwhetherornottosave theirmoney inasavingsaccountorput it somewhere theycan't touch it.Fromthat they learnhowmuch theyneed tokeeponhand foreverydayneedsand emergencies. I tell them they're not going to get interest on their savingsuntil the endof thegameand that introduces them to thenotionof compoundinterest.AndI'veactuallygiventhemnegativeinterestoninvestmentsinordertoreflectwhatwe'veseenrecentlyinthemarkets.Ifindalotofstudentswillput10or15percentoftheirsavingseverymonthintoaninvestmentaccountandkeeptherestintheirsavingsaccountsjustincasesomethinghappens.Sointhegamemystudentslearntosaveforthatjust-in-casemoment.Anddoesthatlearningonbudgetingstick?Ayearaftersheattendedhispersonal financecourse,ayoungsinglemother

whoworkedtwojobsinadditiontogoingtoschoolemailedherformerteachertosaythatshewasstillworkingonherbudget,trackingeverythingshespendswithinaspreadsheetthewaythatMathewtaughtthemtodo.Whenstudentslikeherdiscoverthatthey'respendingthousandsofdollarsayearonahobbywhenitcouldbeputtobetteruseelsewhere,theycomearoundtochangingtheirhabitsovertime.Andoneofthosehabitsneedstobethatthemoretheyearnthemorethey should save, rather than spending it on experiences or items that don'tenhancetheirlivesinthelongterm.Whichwasn't the case for oneofMathew's adult friendswho is “really into

firearms” and, having recently stepped into a higher paying job, planned tospend$1,000ona riflewithhis firstpaycheck—despitestillbeing in the job'sprobationaryperiod.AsMathewpointedout, “Heaven forbidhe loseshis job;thenhehasa$1,000paperweight thatnobody'sgoing togivehim thatmoneyfor.”Buthowmanyofusknowsomeonewhomakesfrivolouspurchases—orhave

even done things like that ourselves?Maybe if we'd had the chance to learnaboutpersonalfinanceinschool,wouldwestillengageinthesekindsofspur-of-the-momentbehaviors?In 2007, poet JonathanReed entered a two-minute video inAARP'sU@50

contest,forwhichhewonsecondplace.Participantshadtodescribewhattheyexpectedtheir life tobelikewhentheyturned50.InspiredbytheArgentineanpoliticalcampaignadvertisement,“TheTruth,”Reedwroteandrecorded“LostGeneration”which,onthefaceofit,readslikeanindictmentoftoday'squick-fix

society,with thevoiceover speakingofayoungergeneration that is “apatheticandlethargic”andforwhom“itisfoolishtopresumethatthereishope.”Except,that'snotthemessageyougetwhenyoureadeachofthesentencesin

reverseorder.Readingthepoembackwards,itactuallycelebratesbeliefinanewera,oneinwhichfamilytrumpsworkandtruehappinessisn'taboutmoneybutwhatlieswithin.Takealook:ReadForward:IampartofalostgenerationandIrefusetobelievethatIcanchangetheworld.Irealizethismaybeashockbut“Happinesscomesfromwithin”isalie,and“Moneywillmakemehappy”Soin30yearsIwilltellmychildrentheyarenotthemostimportantthinginmylifeMyemployerwillknowthatIhavemyprioritiesstraightbecauseworkismoreimportantthanfamily.ItellyouthisonceuponatimefamiliesstayedtogetherbutthiswillnotbetrueinmyeraThisisaquickfixsociety.expertstellme30yearsfromnowIwillbecelebratingthe10thanniversaryofmydivorceIdonotconcedethatIwillliveinacountryofmyownmakingInthefutureEnvironmentaldestructionwillbethenormNolongercanitbesaidthat

MypeersandIcareaboutthisearthItwillbeevidentthatMygenerationisapatheticandlethargicItisfoolishtopresumethatThereishope.

Andallofthiswillcometrueunlesswechoosetoreverseit.

ReadBackward:Thereishope.ItisfoolishtopresumethatMygenerationisapatheticandlethargicItwillbeevidentthatMypeersandIcareaboutthisearthNolongercanitbesaidthatEnvironmentaldestructionwillbethenormInthefutureIwillliveinacountryofmyownmakingIdonotconcedethat30years fromnowIwillbecelebrating the10thanniversaryofmydivorceExpertstellmethisisaquickfixsocietybutthiswillnotbetrueinmyeraFamiliesstayedtogetherOnceuponatimeItellyouthisfamilyismoreimportantthanworkIhavemyprioritiesstraightbecause

MyemployerwillknowthattheyarenotthemostimportantthinginmylifeSoin30yearsIwilltellmychildren“Moneywillmakemehappy”isalieand“Happinesscomesfromwithin”IrealizethismaybeashockbutIcanchangetheworldandIrefusetobelievethatIampartofalostgeneration.Thisisanalogoustowherewestandtodaywithrespecttofinancialliteracy.As

wehavestatedrepeatedly(andwillcontinuetodosothroughouttherestofthisbook), we have done a decent job in this country of getting the 401(k) to betakenseriouslyandwearestartingtoseethebenefitsfromthemanycontextualfactors thathavebeenput inplace toremindpeopleof thevalueofsavingfortheirretirement.But in order to reverse the current trend and experience a happier state of

affairs—if not for the current generation of retirees, then for future ones—wemustalsoaddresstheissueofbeliefs.Remarkable,passionate, andappropriatelyexperienced teachers likeMathew

Frost are doing just that—reinforcing the beliefs of their students so they canpreparethemselvesandfinanciallyplanforthereal-lifesituationsthatcurrentlysurprisefartoomanyofusanddetrimentallyimpactthelittlefinancialsecuritywemight have. But are there enough of these exceptional teachers in today'sschools,andarewehelpingorhinderingtheirefforts?AttheendofMathew'spersonalfinanceclass,thestudentsareaskedtowritea

two-pagepapercoveringjustthreethings:1.Tellastoryaboutwhathappenedduringthisexperience.2.Whatdidyoulearn?3.Howwouldyouchangethegametomakeitbetter?Asanotherofhisstudents,BonitaGarcia(notherrealname),wroteinpart:I

knowthatthedecisionswemadeinthegameweren'tthatbad,buttheyweren'tas thought throughas theyshouldhavebeen.Weshouldhavesavedmoreandpartofthatwasnotcomingupwithabetterbudget.Irecommendthisgametoallhighschoolstudents,notjustonesstudyingeconomics.Ithelpedmeorganizemyfuturefinancialplanningandbetterunderstandwhatitmeanstospendlessandsavemore. I learned thatneedsmustalwayscomebeforewantsnomatter

what. I would like to take part in this project again next year if possible. Iappreciate all that this project has taught me and I will never forget what Ilearnedaboutbudgeting.Intermsofourfocusontherelationshipbetweencontextandbeliefs,itisclear

thatitisnotenoughsimplytodrawattentiontotheissueoffinancialliteracybyintroducingthetopicintoourschools.Suchefforts,likeMathewFrost's,needtobemotivationalandstructuredinsuchawaythattheyhelptochangeindividualbeliefs.Tacklingbeliefsat thispersonal level is stillnotsufficient.Whatweneed to

do,ifanyretirementreadinessinitiativeistrulygoingtomovetheneedle,istoeffectchangeatthewider,societallevel.Howmightwedo that?Toanswer thatquestionwelookedfor inspirationat

some of the most effective advertising campaigns in U.S. history to discoverhowtheynotonlychangedbehaviorbutinsomecasescompletelyreshapedourculturalnorms.

Chapter6

LessonsLearned,ChangingOutcomes

The underlying theme was that the social change required to bring womenintotheworkforcewasapatrioticresponsibilityforwomenandemployers.

—RosietheRivetercampaign,AdCouncilwebsiteLet us imagine for the moment that we already have a long-running, highlypopularretirementreadinesscampaignthathassignificantlyboostedthenumberofAmericanswhoaresavingmoreforthetimewhentheyarenolongerableorwilling to work. Thanks to the success of this campaign we have largelycircumnavigated the problem where millions of Americans are living longerwithout the means to support themselves. In short, we have successfullyaccomplishedwhatwesetouttodo:tochangebehaviorsotheaverageperson'smoneyoutlivesthem,nottheotherwayaround.Whyisn'tthereacampaignlikethat?Certainlythereisplentyofinformationalreadyoutthereactingasbothcarrot

(here'swhatyouneedtodo)andstick(here'swherewe'reheadedifthingsdon'tchangesoon).TheInformationAgeoffersbothgoodandbadnewsonanotherscore:itcouldbethattheoverwhelmingamountofinformationacrossmultiple,oftencontradictory,channelsisstiflingaction.Wedon'tneedmore information.Whatweneedisawaytoarticulateaclearmessagethattellspeopleonlywhatisreallynecessary, showing themhow touse that information,andweaving it insuchawaythattheyarestronglymotivatedtodoso.Whatweneed is a national campaign that's sticky enough to change beliefs

andactions.Howdowedothat?

DisruptingThinkingCommunication experts know that people don't adopt new behaviors simplyfromhavingeasieraccesstomoreinformation.Muchmorethanthatisneeded.All successfuladvertisingcampaignsneed tobepersuasiveandaredesigned

with theseelements:here'swhatIhaveforyou,here'swhat itwilldoforyou,here'swhoweare(soyoucantrustus),andhere'swhatyouneedtodonext(thecalltoaction).For suchacampaign to reach thewidestnumberofpeople, itwouldbenefit

frombeingbackedbyawide rangeofkeyconstituencies. It isnotenough forthistobearetirementservicesindustry-onlyeffort,forseveralreasons.Perhapsmostimportantly,weneedtoinvolveeveryone,notonlytoreinforce

that this is a social not an industry-specific issue, but alsobecause—asAlbertEinsteinonce famouslysaid,“Wecan't solveproblemswith thesame thinkingwe used when we created them.” Yet we know how hard it is for people,especiallyexpertswhohavebeenclosetoaspecifictopicforaverylongtime,tochange the way they think. We spend a great deal of time (10,000 hours,according toMalcolmGladwell inOutliers: The Story of Success) developingandembeddingourexpertiseorvalueproposition.Beingwilling tochange theperspective on which that expertise was built is something many people areresistanttodo.AsFieldingMiller,CEOofCAPTRUSTFinancialAdvisors,pointsout:Beingactivelyinvolvedinprovidingparticipanteducationandadviceaffordsahealthyreminderofwhattheworldlookslikeformostemployees.BuildingasufficientretirementsavingsisanelusivegoalformostAmericanworkers,especially thoseonthelowerendof the incomescale.Overthepastseveralyears we have seen many failed attempts aimed at improving outcomes—whether increasing savings, better investing, or basic retirement planning. Ibelievethesefailuresaremostlyduetothemyopicorientationofthefinancialservice industry, which has been disconnected from the real customer, theparticipant. Improvingoutcomes startswith ourwillingness to get out thereandgo eye to eyewith the singlemomworking the third shift at the textileplant.Thereisnosubstituteforthistypeofconnection—itkeepsusgroundedandfocusedonthemainevent:creatingsolutionsthatimproveoutcomesforeveryone.As the founder of the World Innovation Institute, entrepreneur, and

philanthropist Naveen Jain articulated in Forbes when writing online aboutdisruptiveinnovation:I believe that people whowill come upwith creative solutions to solve theworld'sbiggestproblem—ecologicaldevastation,globalwarming,theglobaldebtcrisisanddistributionofdwindlingnatural resources, tonamea few—

will NOT be experts in their fields. The real disruptors will be thoseindividualswhoarenotsteepedinoneindustryofchoice,withthosecoveted10,000hoursofexperience,butinstead,individualswhoapproachchallengeswith a clean lens, bringing together diverse experiences, knowledge, andopportunities.Another reasonwhywe need to open up the retirement readiness debate is

becauseoftheskepticismwithwhichmanypeopleviewanysolelyindustry-orbusiness-ledinitiatives.TaketheKeepAmericaBeautiful(KAB)campaignthatspawnedtheCryingIndianPSA,forexample.Lookonlineandyoucanreadtheconsiderablecriticismthatensuedbecauseofwhofundedit:bottlers, fast foodcompanies, andotherpackagingmanufacturers. It seems that regardlessof thesuccessKeepAmericaBeautifulhadinhelpingtobringattentiontotheproblemof littering and pollution, some commentators never saw beyond thecontroversialaspectsofthecampaign.Theseincludedthebelief(atleastinthemind of detractors) that the KAB campaign diverted attention away from theresponsibilitiesofthepackagingmanufacturerswhohadbeenfacinglegislationtocreatemoreexpensive,reusablecontainers,ratherthandisposableones.TheirargumentwasthattheKeepAmericaBeautifulcampaignshiftedtheonusontoconsumersbytellingthemitwastheirresponsibilitytoclearuptheirlitter,ratherthan requiring different standards from the manufacturers in terms of theexcessivepackagingtheyproduced.Similarly, if we were to tackle retirement readiness from only a financial

servicesindustryperspectiveitishighlylikelythatwewouldfacethesamekindofskepticismthatwasleveledattheKABcampaign,withcriticsassumingthatweweredoingthisjusttotryandsellproductsandservices,andlinetheirownpockets.That is why the campaign we are proposing needs to be broader than any

single company or even the industry as a whole. It needs the support ofgovernment and employers, as well as community groups and otherorganizationalstakeholders.

CampaignRoleModelsBeforeweevengetintotheissueofsupport,though,thequestionremains:whatwould such a campaign, offering a compelling message around retirementreadiness,looklike?

In order to answer that question, we looked to various public serviceannouncements for inspiration.Wewanted to go beyond a single campaign—such asKeepAmericaBeautiful—in order to exploremore deeply how theseapproacheshavefundamentallychangedAmericanbehaviorsandsocialnorms.The additional campaigns we investigated were: Rosie the Riveter, SmokeyBear,ClickItOrTicket,andSmokingIsUgly.The choice of which of the many anti-smoking campaigns to investigate

highlightssubtletyaroundpubliccommunicationcampaignsthatisusefulforustoaddressattheoutset.As Julia Coffman points out in her 2002 Harvard Family Research Project

paperentitledPublicCommunicationCampaignEvaluation:AnEnvironmentalScanofChallenges,Criticisms,Practice,andOpportunities,therearetwotypesof public-will campaigns: those thatmobilize action in order to influence andchange policy, and those that are designed either to eliminate antisocial orproblematic behaviors in individuals, or shape desired behaviors that not onlybenefit the person but also help to change social norms. Such campaigns aredesignednotjusttoinfluenceaperson'sresolvetoact,butneedtoidentifyveryspecificallywhatthenewbehaviorshouldlooklike.For example, in the case of two very different anti-smoking campaigns, an

organization like The Truth (www.thetruth.com) is focused on influencingpolicy,withthetargetbeingthetobaccoindustry.Astheystateontheirwebsite:“Ourphilosophy isn't anti-smoker or pro-smoker. It's not even about smoking.It's about the tobacco industry manipulating their products, research, andadvertisingtosecure‘replacements’forthe1200customersthey‘lose’everydayinAmerica.Youknow,becausetheydie.”Contrast that message with model Christy Turlington's Smoking Is Ugly

campaign that is focused on showing teenagers the undesirable consequences(bad breath, smelly clothing, stained teeth) of smoking cigarettes. Both arefocused on the issue of smoking, but from different perspectives, and as suchprovoke different kinds of action. The Truth is lobbying against the tobaccoindustry, presumably to stop the manufacture of cigarettes, while Turlingtonwantstopersuadetheappearance-consciousteenagernottosmoke.The perspective that we are focusing on regarding the retirement readiness

issueisthatofindividualbehaviorchange,notpolicy,whichishowweselectedthefollowingfiveclassiccampaignslistedinchronologicalorderbelow.Youareprobably familiar withmost, if not all, of them—but here's a quick refresher,including the Keep America Beautiful campaign that we introduced at the

beginningofthebook.

RosietheRiveter(1942–1945)BeforeRosiewas launched on the national stage, the social norm inAmericawas formarriedwomen towork in the home.Regardless ofwhat career theymay have had beforemarriage, afterwards their primary responsibility was tokeephouseandbringupchildren.WorldWarIIchangedallthat.Withsomanymen fighting overseas, therewas a shortage ofworkerswho could “man” thefactoriesandassemblylines.Thesejobswerevitaltothewareffort,principallythe munitions and aircraft industries. Those available to fill vacant positionsweremainlywomen.The motivational message of “We Can Do It!” illustrated by an attractive

womaninoverallsflexinghermuscles,wasclearlyaimedatfemalepatriotism.Specificmessages included: “Themorewomen at work, the soonerwewin,”withwomenbeingremindedthatbysupportingthewareffort in thiswaytheyweremorelikelytogettheirmenhomequicker.AsidefromthecolorfulRosieposters,magazinesthatwereenjoyingincreased

circulationsplayedabigpartinspreadingthismessage.NormanRockwellevendrew thecover for theSaturdayEveningPost'sMemorialDay1943 issue thatfeaturedtheRosieimage.There was no avoiding the message. Andmillions of women answered the

call, swelling thenumberofAmericanworkers focusedon thewareffortby2million, according to the Ad Council that was responsible for designing thecampaign and had been sponsored by theOffice ofWar Information andWarManpowerCommission.Thequestionofwhetherwomenhadthestrengthandothercapacitiestotake

onthesejobswasaddressedbygovernmentadvertisementsthatpointedoutthatifawomancoulduseanelectricmixer,thenshecouldoperateadrill!Picturesand newsreels of women operating lathes, welding parts at steel plants, andhandlingjackhammerswenthandinhandwiththearguablylessoneroustaskoffasteningrivetsonaircraft.Ifanyonehadbeeninanydoubtastowhatthe“littlewomanathome”wascapableofdoingonthefactoryfloor,themillionsofreal-lifeRosietheRivetersputanendtoallthat.Unfortunately,ittookawartospurthatsocialchange.Thiscampaigndidnotjustgalvanizethewareffortathomebyrecruitingvital

workers;itcompletelychangedthesocialclimate.Womennowknewwhatthey

werecapableofandthewareffortundoubtedly influenced thesecondwaveofthefeministmovementthatbeganintheearly1960s.Thedaughtersofwartimewomen had very compelling role models who could show them how womencouldtaketheirplaceinawiderangeofworkplaces—notjustthefactoryfloor.

SmokeyBear(1944–Present)Wildfires had always been a problem for theU.S. Forest Service but, aswithRosie,WorldWarIIprovokedanewurgencytocurbtheireffects.TheJapanesemilitaryhadattemptedtoignitemanyWestCoastforestswithaweaponknownastheFu-Go—balloonbombsthatcouldbereleasedfromshipsandaircraft.TheideabehindtheseactivitieswastocreatepanicandshowAmericansthatattacksweren'trestrictedtoPearlHarbor—wecouldbeattackedathometoo.Ithasbeenestimated that something like1,000of these fire balloons actually reached theU.S.coast.AlthoughthethreatoftheseFu-Gobombswaskeptfairlylow-keybytheauthorities—theyworriedaboutwidespreadpanic—newschannelsreportedthat five children and their teacher had been killed as they approached one ofthese fire bombs that had landed,without previously exploding, in a forest inOregon.Prior to Smokey, the Disney organization had allowed characters including

Bambi to be used in forest fire prevention campaigns. When that agreementexpired,anothercuteanimalmessengerneededtobefound;thus,SmokeyBearwasborn.AswithRosie,thebehaviorrequiredofAmericansinrelationtothiscampaign

wasverysimpleandspecific.Insteadof“gotowork”itwastopreventwildfiresby avoiding thehuman thoughtlessness that is responsible for somuchof thisdestruction. “Remember—onlyYOUcan prevent forest fires,”was one of theearlierslogans;messageshavebeenmodifiedovertheyears.GiventhatSmokeyisthelongestrunningcampaigninAdCouncilhistory,itis

almost certain thatmostofyouhavebeenexposed to thesemessages in someshape or form. In addition to posters, there have been cartoons, comic strips,dolls,books,andotherparaphernaliaalldedicatedtopromotingthemessageofSmokey:becarefulnottoinadvertentlystartafirewhenyouareanywhereneardryvegetation.Asa resultof thismass-media focus, theSmokeyBearcampaign iscredited

withhavingreducedthenumberofacreslostannuallyfrom22millionacres—anareaequivalent to thesizeofMaine—to8.4millionacres,according to the

mostrecent(2000)figuresgivenbytheAdCouncil.

KeepAmericaBeautiful(1961–1983)Right up to the end ofWorldWar II in theUnited States, buying a soda poptypicallymeantpurchasingaglassbottlefromastoretowhichyoucouldreturnthe empty container for a refill or receive a small deposit back. In 1947,accordingtotheInstituteforLocalSelf-Reliance'swebsite,themarketshareforcarbonated softdrinks in refillableglassbottleswas100percent;by2000 thishaddroppedtolessthan1percent.Intheinterveningperiod,thebenefitsofone-waycontainers—notjustforsoda

butawiderangeofproducts—werebeingpromoted:consumerswerenowfreedup from having to store and return empty bottles; retailers no longer had tomanagethereturnofdeposits;andbottlemanufacturersdidnothavetomaintainwashandinspectionsitestodealwithallthebottlesthatcamebacktothem.Verysoon,however,thequestionbecame:whatdowedoabouttheincreasein

littering as a result of the trend for selling beverages (among other things) inaluminumcansandnonreturnableplasticorglassbottles?In1953,Vermontoffereditsresponsebyenactingabanonthesaleofbeerin

nonrefillablebottles.Thatwastheyearinwhich,accordingtotheKeepAmericaBeautifulwebsite:“(A)groupofcorporateandcivic leadersmet inNewYorkCity to discuss a revolutionary idea—bringing the public and private sectorstogethertodevelopandpromoteanationalcleanlinessethic.”TheKAB's firstPublicServiceAnnouncement (PSA)appearedshortlyafter,

in1956.Butitwasn'tuntilthecoalition—whichincludedbusinessinterestslikeCoca-Cola, PepsiCo, PhilipMorris, andAnheuser-Busch aswell as then FirstLady,LadyBird Johnson—began their collaborationwith theAdCouncil thattheiradvertisingmessagesbegantopackamorepowerfulpunch.AsHeatherRogerspointsoutinherbookGoneTomorrow:TheHiddenLifeof

Garbage,“theUnitedStatesistheplanet'snumber-oneproduceroftrash,”andpackaging represents one third of that (see Plumer,TheOrigins of Anti-LitterCampaigns), so there has never been a lack of littering opportunities in thiscountry. Enter The Crying Indian, the wake-up call to Americans that wedescribedat lengthearlier in thisbookandwhichprovokedmoreofus topayattentiontotheharmweweredoingtotheenvironment.Thisaward-winningPSA,alongsidethecommunity-led,statewide,andfederal

initiatives that occurred in its wake, helped to make a dent in the littering

statistics. According to one study funded by the KAB: “The actual count ofoveralllitterisdownby61percentsince1969,”withareductioninlitteringofbeveragecontainersofalmost75percent.

ClickitorTicket(1993–Present)SincethecrashtestdummiesVinceandLarrywereintroducedtotheAmericanpublic in 1985 to advocate the use of safety belts in cars (they were finallyretiredin1999),“usagehasincreasedfrom14percentto79percent,savinganestimated85,000lives,and$3.2billionincoststosociety,”accordingtotheAdCouncil.In 1993 the baton was picked up by various states, starting with North

Carolina, with the Click It Or Ticket campaign that is now mobilizedcountrywidebytheNationalHighwayTrafficSafetyAdministration(NHTSA).Seatbeltusageisanissuewherethelawsdifferfromstatetostate.Thirty-two

states,plusDCandvariousU.S.territories,upholdwhatareknownasprimaryseat belt laws,meaning that law enforcement officers can stop non-compliantdriversandissueticketswithoutanyothertrafficoffensetakingplace.Inthe17states with secondary seat belt laws, there has to be another citable trafficinfractionbefore lawenforcementofficers can issuea ticket fornotwearingaseatbelt.Thechangeinbehaviorrequiredwassosimplethat,today,wearingseatbelts

is an accepted social norm across America, although campaigns like thesecontinuetobefundedbecauseoftheeasewithwhichwecanfallbackintobadhabitsifwearenotconstantlyremindedofhowimportantitistobuckleup.

SmokingisUgly(2010–Present)Ifthereisanyissuethatlendsitselftosomeofthemostgraphicandfrighteningvisuals being seen in advertising today, it is smoking. The Smoking Is Uglycampaign, spearheaded by the World Health Organization and Centers forDiseaseControlandPrevention,andlaunchedonWorldNoTobaccoDay,May31,2010,isnoexception.Thecampaignisfocusedprincipallyonyoungwomen—whom theNationalWomen'sHealthNetwork claims are being increasinglytargetedbytobaccocompanies—eventhoughwomenmakeuponly20percentof smokers worldwide. Posters that help to highlight the message of thecampaign include an attractive model wearing a voice box with the slogan:“Chic?No,throatcancer,”andonefeaturingaseatedmodelwithagangrenous

leg.FormerCalvinKleinmodelChristyTurlingtonisthehigh-profilefaceofthis

campaign. Her interest stems from having been diagnosed with early-stageemphysemafollowingmorethanadecadeofsmoking—shestartedthehabitattheageof13.Herfatherdiedoflungcancer,asdomorethan150,000peopleintheUnitedStatesannually.Turlingtonrecordeda30-secondTVslotfortheCDCthat recounts the story of her father and talks about the addictive nature ofnicotineandherownstruggletoquitsmoking.These, then, are the five approacheswe studied in order to get a handle on

what components might be included in a successful retirement readinesscampaign.Whatappeared tobe thecase is thateachof thesecampaigns falls—roughly

speaking—along a continuum.At one end of the continuum are contexts, thecontextual factors that act as continual reminders, provoking top-of-mindawarenessforthebehaviorchangesought;attheotherendarebeliefs.We know that new habits do not get embedded overnight. Therefore these

carrot-and-stick endeavors—such as additional trash cans in public places andthedevelopmentofrecyclinginitiativesforthelitteringandpollutionissueandlegislationrequiringseatbeltsineverycarplusfinesfornotwearingthem—actas reminders until the new behavior becomes (at least in most cases) secondnature.Theneedforcontextualfactors,generallyspeaking,nevergoesaway,except

inthecaseofbehaviorsdirectlyrelatedtoadiscreteeffort,suchasthewartimecampaignofRosietheRiveter.Asnewpopulationsjointhepoolofpeoplefromwhom the desired behavior is required, anti-smoking and messages aboutbucklingupwhendrivingacarneedtobeongoing.Aswe said previously, at the other end of this continuum from context are

beliefs.Whereatopicsuchasretirementreadinessfallsonthiscontinuumdependson

theoptimalbalancebetweencontextandbeliefs.Wewilltakethetwoextremesto show how this pans out.What follows ismore “rule of thumb” than exactscience. Obviously both context and beliefs play a role in any successfulbehaviorchangecampaign,butthetwointersectbydifferentdegrees.For example, wearing seat belts is a largely contextual issue. In the years

directly after 1968, when the U.S. National Highway Safety Bureau firstrequiredautomobilemanufacturerstoinstalllapbeltsforallseatsandshoulder

beltsforfrontseats,usagewasthoughttohavebeenbetween10and15percent.Moststatesfollowedthatbyenactinglegislationthatenforcedfinesforfailuretocomply.Eventhoughtheamountofthesefinesissmall(averaging$25inmostcases),thereissomethingaboutbeingstoppedbyatrafficcopandissuedaticketthattendstokeepmostpeopleinline.Since the Click It or Ticket campaign began, seat belt usage nationally has

increasedfrom69percentin1998toaround88percenttoday.Aswithanythingaimedatinfluencingbehavior,thelikelihoodofachieving100percentsuccessisunrealistic.Thoselesslikelytobuckleupincludecommercialandpick-uptruckdrivers,men driving in rural areas, and people driving at night. This suggeststhatsomepeopleresistadheringtoseatbeltlawswhentheythinktheywon'tbeseenandhencecaught,whileothersfinditinconvenient.Othergroupswiththetendency tobuckleup leastare teenagersanddriverswhohavebeendrinking;therearealwayssomesectionsofthecommunitywhowillthrowcautiontothewind!Asisthecasewithseatbelts,whenyouareabletolegislatetothisextentyou

don't have to solve for much else. But in a country like America, with aConstitution that secures freedom of expression and choice in matters likeretirement,weareunlikelytoseelegislationthatwouldmandateU.S.citizenstosave for their retirement years. The chances of a simplemandate of an initialdeferral rateof,say,6percent,andannualauto-escalationsof2percentuntilacertaindesiredpercentageisreached—whetherthatbe12percentasinAustraliaor20percentassomeindustryexpertsintheUnitedStateshavefoundtobetheupperlevelthatconsumerswillbear—areslimtonone.Plus,weareunlikelytosee legislation thatpreventsemployeesfromaccessing their retirementsavingsuntiltheyhavereachedretirementage.Of course, we already have a system in place like that, given that Social

Securityisamandatorysavingsprogramwherethemoneypaidinispooledandnotavailableasaloanpriortotheindividualbeingeligibleforbenefits.Butthequestionremainsastowhetherweneedtoprotectpeoplefromthemselvesandmakeit impossiblefor themtodrawfromtheir retirementsavingsprematurelysothattheirlong-termfuturesaremoresecure.So,themorewearewillingorabletolegislateandinfluencebehaviorthrough

contextualfactors,bywhichpeoplemustobeyorbefinedheavilyorpunishedby some other means, the less we have to appeal to the emotions as analternativemeansofchangingpeople'sbeliefs.Even in wartime—the circumstances that provoked the Rosie the Riveter

campaign—you can't force people to go to work. No American expectedpolicymakers,in1942aftertheUnitedStatesenteredWorldWarII,tomandatethattheirwife,mother,sister,ordaughterhadtojointhewareffortbygettingafactoryorassemblylinejob.In cases such as this,where legislation is not an option, a successful public

service campaign had to appeal more to people's beliefs, including—whererelevant—theirsenseofpatriotism.TheNational Forest Service, on the other hand, enforces some pretty heavy

fines foranyone found lightingcampfiresduringdeclared firebans.Plus, theyfrequently issue monetary rewards for information leading to the arrest andconvictionofanyonewhothoughtlesslycausesawildfire.Havingsaidthat,theenvironmentthattheNationalForestServicehastopoliceisvast,meaningthattheycannot relyentirelyon thepunitiveelement.Which iswherean icon likeSmokeyBearcomesin,toappealtothebetterjudgmentofthegeneralpublicasit relates to pro-social behavior: don't lightmatches or otherwise start fires incircumstancesthatcouldprovedangerous!InthecaseofSmokingIsUgly,thecampaign'semphasisisconcernedwiththe

self-concept and self-esteem of young women and their beliefs around howsmokingcigarettesminimizestheirappeal.Additionally,iteducatesthemaboutthe fact that “lung cancer killsmorewomen than breast, ovarian, and uterinecancerscombined.”Thecampaignthatfallsmoreinthemiddleof thiscontinuumofcontextand

beliefs was the Keep America Beautiful campaign. There was an element ofpatriotism involved,alsobolsteredbyefforts runningpriorandconcurrently—such asLadyBird Johnson'sHighwayBeautificationAct of 1965—but itwasalso necessary to support these efforts with contextual factors such as theincreasednumbersoftrashcansinpublicareas.

ThePowerofBeliefsHistorically,thefinancialservicesindustryhasfocusedlargelyonthebeliefsideofthecontinuum,withearlyeffortsinvolvedatconvincingindividualstosave.When our focus on changing beliefs didn't arrive at the desired outcome, thependulumswungtoofarintheotherdirection,tocontext.Thevastmajorityofconversations going on in our industry right now are concernedwith context:fromourfocusonauto-enrollmenttotargetdateinvestmentsolutions.

Ifwearetotakealeafoutofthebooksofthesesuccessfulpublicawarenesscampaigns, we need to design a national retirement readiness initiative thatdoesn't just rely on context, but also taps into the power of our beliefs at asocietalaswellasanindividuallevel.Thisissomethingwedon'tthinkwehavetackledwellinthepastandseemtobeoverlookingcurrently.AswepointedoutintheIntroduction,webelievethesocialclimateisripeto

galvanizethecountryaroundthisissue.Butweneedacampaignwithavision—one that is specific about the behavior change we need in order for moreAmericanstobefinanciallysecurewhentheyarenolongerworking.Weneedtobeabletotellpeoplewhattheyneedtodo insimple,unambiguousterms.Andthat requires a clear and compelling message and perhaps an empatheticmessenger,intheveinofRosie,SmokeyBear,andtheCryingIndian.Plus,weneed to leverage the media so that the message reaches a wide audiencefrequentlyenoughtobememorable.Notleast,weneedtobelievethatpeopledohavethecapacitytochange,given

the support of contextual factors that remind them continually that they areformingnewhabits—whichtakestimeandisnotanovernightquickfix.Thesethemes,then—ofcontext,beliefs,andresolve,andwaystotellamore

compellingstoryratherthanrelyingonleft-brainedfocusedstatisticsandfactualinformation—aretheoneswewillbeexploringinmoredepthinthefollowingthree chapters, as they relate to the issue of retirement. From a context-heavyapproach we are envisioning a much more innovative, national public-willcampaignthattakesallofthesecomponentsintoaccount,butperhapsmorethananything lays greater stress on the beliefs and emotions that all successfulmarketing campaigns tap into, but which our industry and government haslargelyignoredwhenitcomestotalkingaboutretirement.First,however,let'stakealookattheimportanceofcontext—thetopicofthe

nextchapter.

Chapter7

ThePowerofContext

Ifyouwanttoknowwhysomeonedoesordoesn'tbuy,youhavetounderstandhowtheenvironmentshapesbehavior.Divorcingthequestforunderstandingfromthecontextinwhichittakesplaceisarecipeforleadingyourselfastray.

—PhilipGraves,author,ConsumerologyInmid-September2010, theBritishBroadcastingCorporation (BBC)aired thefirstepisodeintheUKofashortdocumentaryseriesentitledTheYoungOnes.Itsstarswereanythingbutyoung.Sixelderlycelebrities(averageage:80years)were to live together for a week to recreate an experiment that Harvardpsychologist Professor Ellen Langer had originally devised and run in 1981.That landmark study had spawned a book by Langer with the titleCounterclockwise:MindfulHealthandthePowerofPossibility.Now,almost30years later, viewers could watch the unfolding of another innovativecounterclockwise experiment. But instead of being conducted privately withnursinghomeresidentsitwastobebroadcastpubliclywiththeaimofshowinghow—injustoneweek—itispossibleforfolkswhoconsiderthemselvestobe“overthehill”tothinkthemselvesyoungagain.ThehousethatcharacteractressLizSmithand1950sscreenstarSylviaSyms

would share with former TV presenter Lionel Blair, newspaper editor DerekJameson, BBC Television's first-ever newscaster Kenneth Kendall, andinternational cricket umpireDickieBirdwas anythingbut ordinary, by today'sstandards at least. The country retreat had been decked out as a 1975 timecapsule with suitably gaudy wallpaper, shag-pile carpets, plus kitchenappliances, furniture, and even bedding reminiscent of that particular year.Indeed,1975hadbeen selectedcarefullyas itwasone inwhicheachof theseformercelebritieshadexperiencedaheyday.But it wasn't just the house that had been given a historic makeover. The

celebritiesweretodressastheyhadinthemid-1970s:TVshowsoftheerawerestreamed into the authentic 1970s television set, and reading material wouldincludenewspapersdated35yearsearlier.

Each of the six inhabitants was being primed to remember and potentiallyreenact how they had thought, felt, and behaved as their younger selves byplacingtheminanenvironmentthathelpedthemdoso.Inshort,Langerwasabouttodemonstrate—asshehadrepeatedlywithother

studiesover theyears—that thecontext inwhichwefindourselvescanhaveaprofoundeffectonourbeliefs,behavior,andevenourmentalandphysicalwell-being.In the very first episode of this documentary series, viewerswatched as 80-

year-oldDerekJamesonstruggled tocarryhisownsuitcaseup the14stairs tohis1975-replicabedroom.Ittookhimalloftwominutes.Puffingandmutteringto himself, he had called out for help without anyone coming to his rescue.Greeted by the BBC's “man of science” and series co-presenter, Dr. MichaelMoseley, Jameson grumbled that he had told them that he couldn't climb thestairs unaided but “no one had paid a blind bit of notice.”TowhichMoseleyreplied,“Youdidn'tbelievethatyoucould,butyoudid.”Similarly,theeldestofthesixcelebrityvolunteers—LizSmith—didn'tbelieve

shecouldpickupabrushandpaintwatercolorsasshehaddonewhenshewasyounger, but by the end of the week she was painting with gusto. KennethKendall had repeatedly argued that he wasmuch too old at 85 to even thinkaboutlookingafterdogsagain—somethingwhichhadgivenhimmuchjoyasayoungerman—butbytheendofthethree-episodeserieshehaddecidedtoadoptapairofKingCharles'spaniels.The other four celebrities also achieved remarkable turnarounds, physically

and psychologically. In fact, when the test results of their physical abilities,dexterity, mental acuity, and even IQ were compared with those taken at thebeginningoftheweek,thenumberswereastonishing.Theyshowedbodiesthatwere stronger and minds that were sharper. Which, for Derek Jameson,culminatedinhisbeingabletoputonhisownsocksforthefirsttimeinyears,aswellasmotivatinghimtoofferhisservicesasaguestlecturerforyoung,up-and-comingjournalists.However, the producers of The Young Ones might have asked themselves,

midway through the experiment, if they hadn't risked reversing early gains byturning their newly independent elderly volunteers into couch potatoes onceagainbyintroducingagroupofprofessionalhelperstothehousehold.Anditishere that this short series provides a cautionary note when it comes to thecontext-focused, auto-everything argument proposed by many people in theretirement services industry. We must balance our desire to shape behavior

through contextual drivers against the potential erosion of personalresponsibility,knowledge,andabilitythatimpactourbeliefs.Whentheircaregiversdideverythingforthem,theinhabitantsbegantorevert

backtotheiroldways(figurativelyandliterally).Theynowhadsomeoneelsetogoupstairsforwhateveritwastheyhadforgotten,ortomakethatcupoftea,orto help them get dressed. The celebrity volunteers' minds and bodies adaptedaccordinglyandtheybecamelazierandlesswillingtotrynewthingsasaresult.TheproductionstaffandLangerquicklysawthenegativeeffects that thishelpwashavingontheelderlyresidentsandsotheservicesofthesecaregiverswereremoved.Certainly, context counts. Undoubtedly immersing them in a 1975

environment provoked the six celebrities featured in The Young Onesdocumentary to think, feel, and act much younger than their years. But thecontextualfactorsprovedevenmorecomplex than that.TheLangerstudyalsodemonstratedhowinextricablyconnectedbeliefsandcontextreallyareandhowby modifying either of them, the other will be affected. Even if it was atemporary and imaginary scenario, by enabling these celebrity volunteers torevisitatimewhentheywerenotbeingbombardedbysocialnorms(beliefs)thatexpected older people to be frail, lose their memories, and be dependent onothers,theyregainedmuchoftheirearlierstrength,vigor,andmentalsharpness.

TheContextofLitteringThe Keep America Beautiful (KAB) campaign discovered that context isimportantwhenitcomestodealingwiththeissueoflittering,sotheypositionedtrash cans to make it more convenient for people to dispose of litter andpromoted fines that acted as cautionary reminders to do so. Of course, socialnormsandbeliefsalsoplayedrolesintheoveralloutcome.Inthesummerof2008,theKABcampaignadministeredaseriesofactivities

that includedobservingalmost10,000people across130different locations in10 states. They conducted intercept interviewswith a number of these peopleandfollowedthoseupwithanational telephonesurveyinorder togetabetterhandleonwholitters,whytheylitter,andtherelativeimportanceofcontextualandindividualdriversforlitteringbehavior.Backin1969,whenKABpublishedasimilarstudy,therewasonlyamoderate

level of concern about littering; it was only starting to creep into our social

conscience that this was unacceptable behavior. Today's social norms placegreater emphasis on not littering and KAB's 2009 report went on to say:“Americans view litter as a serious issue; many individuals feel a personalobligationnottolitter;andtheywanttoliveinclean,litter-freecommunities.”While littering behavior has by no means been completely eliminated, the

2009KABstudy reported that over the intervening40yearsbetween that andthepreviousreview,visiblelitterhaddecreasedbysome61percent.Pertinent to our argument about themerits of context and beliefs, by using

someprettyadvancedstatisticalmethodologies,KABdiscoveredthatonlyabout15 percent of littering behavior could be directly accounted for by contextualvariables, suchaswhetherornot therewereany trashcans in thevicinityandhowfarpeoplehadtowalktoreachthem.Themajorityofthevariance—some85 percent—was attributed to individual behaviors driven by personal beliefs,includingalackofmotivation.Here again, we find a distinct similarity between the littering issue and

retirementreadiness:peoplerecognizethatbothhaveseriousconsequences,theyadmittofeelingapersonalobligationtodosomethingaboutthem,andtheywantthings to be better (to live in clean, litter-free communities; to ensure theirmoney outlasts them, not the otherway around). In both cases the context inwhichwefindourselvesisapowerfuldriverofbehavior,butinneithercaseistheproblemsolvedbycontextalone.Beliefswillalwaysplayacritical role indrivingconsistentbehavioralchange.Theretirementservicesindustry,havingspentthepast30-oddyearsfocusing

ontryingtochangesavingsbehaviorthrougheducationalofferingsthatarepartof workplace retirement plans, has recognized that more needs to be done toeffectively drive results. Historical efforts to drive plan participation rates,annual salary deferral rates, and appropriate participant investing have beencenteredononsitemeetingswithemployees.Therehasalsobeenaconsiderableamountofcontentgearedtowardmotivatingpeopletosaveforretirementandtoteachthemthebasicsofinvesting.Inthepastfewyears,especially,therehasbeengrowingrecognitionthatthese

educational efforts, inandof themselves,willnot solve the retirement savingscrisisandthatothertacticsneedtobeemployedtochangebehavior.The industry has begun to shift its focus to changing the context in the

workplacewithpowerfulplandesignelementsinordertopromotehigherlevelsof savings.We believe there is significant merit in the discussion and use ofthesedriversandwillexplore thembelow,butwewouldberemiss innot first

revisitingourcautionarynoteaboutoneofthefindingsinTheYoungOnes:howdoing too much for people tends to make them complacent. The ultimatesolution to promoting true retirement readiness will have to strike a balancebetweencontextualdriversandindividualbeliefs.We are just starting to scratch the surface in understanding the power of

context as it relates to voluntary saving for retirement in the workplace. It isimportant to note that the workplace is a considerably more controlledenvironmentthanthatofoureverydaylives,wherelitteringbehavioroccurs.Assuch,webelieveourabilitytoshapesavingsbehaviorbycontrollingcontextintheworkplace is significantlymore powerful than the littering example and islikelyresponsible formore than15percentof theoutcome,aswas thecase inthe2009KABstudy.InSaveMoreTomorrow:PracticalBehavioralFinanceSolutions to Improve

401(k)Plans,apublicationoftheAllianzGlobalInvestorsCenterforBehavioralFinance,authorShlomoBenartzidemonstratesthatchangingthecontextwithinwhichpeoplemakedecisions—choicearchitecture—canhaveaprofoundeffectonthechoicestheymake.BenartziisaprofessorattheUCLAAndersonSchoolof Management and also serves as the Chief Behavioral Economist for theCenter for Behavioral Finance. In this book, Benartzi shows how provenbehavioral finance techniques can be used to improve company retirementsavings plans. He does an excellent job of outlining how choices andinformationputintherightcontextcanpowerfullypromoteretirementreadinessacrosstheUnitedStates.Benartzipresentsa setofambitiousgoals thatcanbeachieved in retirement

plans. The goals are summarized as “90–10–90.” The first “90” refers to thepercentageofemployeeswhoshouldbeparticipating inavoluntaryretirementplan,suchasa401(k).The“10”isthegoalforthepercentageofannualpaythatplanparticipantsshouldbesaving,andit's theminimum.Andthefinal“90”isthe percentage of participants who should use a one-stop, professionallymanaged investment (like a target date solution) for their retirement savingsaccounts.Youcanalsothinkof90–10–90asthreebenchmarks.Asapointofreference,

theequivalentstatisticsfortheaverageplanare77–06–36.Ifyourplanhugstheaverages,SaveMoreTomorrow has 20 action items thatwill help itmeet andexceed those benchmarks. Some of those action items, such as automaticenrollmentandautomaticescalation,arediscussedlaterinthischapter.Butconsiderthis:Inordertobenefitfromthismodel,youmustfirstworkfora

company where you are covered by a plan. Not everyone is. Further, if themedian employee tenure is just shy of five years, what happens when youchangejobsorretire?Doyourollyourbalanceovertoyournextemployerplanor an IRA?Or do you buy that sports car you have your eye on?And if youretirehavingamassedasignificantsum,howdoyouensure itwilloutlastyouandyourspouse(ifmarried)?How,then,mightwebroadenthemodeltoaddresstheseadditionalimportantquestions?

RetirementIndustrySuccessMetricsThemodelonthefollowingpage,Figure7.1,hasbeenexpandedtocontemplatethese questions through three additional concepts; coverage, leakage, andlongevity. Broadening the model in this way allows it to address employeeaccess to a workplace retirement plan (coverage), to employee participationbehavior(90–10–90),keepingassetsintheretirementsystem(leakage),andtherisk that a retireewill outlive their saving's ability toprovide income for theirlifetime(longevity).

Figure7.1PlanSuccessGoals

CoverageWe would be remiss in discussing the concept of contextual drivers withoutaddressingcoverage, since this is themostelementarycontextualdriverofall.Thepresenceofacompanyretirementplanforanemployeeisanalogoustothe

presenceofa trashcanwhenyouneedone.Withoutaplan,employeescannotsave in the workplace. Sadly, in 2010 approximately 40 percent of full-timeAmerican workers were not covered (DOL Current Population Survey 2010).When we asked what percentage of our population should be covered by aworkplace retirement plan,Mark Iwry, SeniorAdvisor to the Secretary of theTreasuryresponded:Coverage by workplace retirement plans should be as broad as possible,consistentwithourvoluntaryemployer-basedsystem.To thatend,under theproposed automatic IRA legislation, employers unwilling to sponsor aretirement planwouldmake it easy for employees to save by automaticallyenrolling them inworkplace IRAs; employeeswould be free to opt out. Butinstead of pursuing this breakthrough in retirement savings coverage, ourcurrentsystemleavestensofmillionsofworkingfamiliesbehind;theiroptionis to save in standalone (non-workplace) IRAswithout payroll deduction orautomaticenrollment,andconsequentlywithtypical takeratesinthesingle-digitpercentages.Althoughtheremayneedtobemoredebatearoundhowweexpandcoverage,

there is little debate about the contention that everyone should have theopportunitytosaveforretirementintheworkplace.

AutomaticPlanFeaturesWhileourdiscussionaroundusingcontexttodrivethesemetricswillbefocusedon a set of design features we term Automatic Plan Features (APFs), werecognize that insomecases implementingAPFs is simplynotpractical,oftendue to thedemographicsof theparticipantpopulationcoupledwith thecurrentregulatory requirements. It is also important tonote that these features arenottheonlywaytodriveplansuccessand,iftheyaretrulynotpractical,asponsorshould find other means by which to do so. For a more comprehensivediscussionaboutadditionalplansuccessdrivers,wesuggestreadingSaveMoreTomorrow.The reason we are primarily focused on these automatic plan features is

becausetheyaretheclearestexampleofhowcontexttrulydoesdrivebehavior.Sowhataretheyandhowtotheywork?ThePensionProtectionActof2006(PPA)expandedtheseplandesignfeatures

and kicked off a significant trend in the design of voluntary workplace

retirementplans. Inessence, theyhelp to shape thecontextofplansby takingadvantageofthesignificantinertiademonstratedbyparticipantsinordertodrivebehavior. Inertia refers to thewell-documented fact that ifyoucreateadefaultbehavior in a voluntary workplace retirement plan, the vast majority of yourparticipantbasewillremaininthatdefaultpatterninperpetuity.Therearethreeprimaryautomaticplanfeaturesthathavepowerfullyimpacted

savingsbehaviorwithintheworkplaceinthepastfewyears:1.AutomaticEnrollment.2.AutomaticEscalation.3.DefaulttoaQualifiedDefaultInvestmentAlternative(QDIA).While readerswithin the retirement services industrymayalreadyknow this

material, and themainstream readermay not desire this amount of detail, ourintenthere is todrawattention to theeffectivenessof thesecontextuallysoundretirement plan features, while emphasizing the need to apply them carefully.Incorrectlyapplied,theirinherentflawscandetrimentallyimpactourchancesofachievingretirementreadiness.The first of these features is automatic enrollment that, while seen bymost

practitionersasarelativelynewphenomenon,hasactuallybeenaroundformanyyears.WhenMcDonald'sCorporationbeganitsplanbackin1984andincludedauto-enrollmentintheplandesign,itwasthefirstcompanytodoso.Accordingto Institutional Investor magazine, at its height the plan boasted participationrates in the low 90 percent range, rates thatwere unheard of in the fast foodindustryandinfactarerareinanyindustry.Ironically,McDonald'sdiscontinuedauto-enrollmentin2002—justfouryears

before thePensionProtectionActwaspassed in2006.While ithadbeenverysuccessfulingarneringparticipation,thefastfoodindustryisdeemedtobelessthan ideal for this featuresincehigh turnover ratesoften result in lowaccountbalances, abandoned accounts, and a great deal ofwork and cost for the planadministrators. There were concerns that McDonald's' abandonment of auto-enrollment,whentherestoftheindustrywascontemplatingfurtherformalizingthisfeature,mightnegativelyimpactthefutureappealofthisapproach.Yettheseconcernsturnedouttobeunfoundedand,withtheclarityprovidedbythePPAin2006,othercompaniesbeganadoptingit.McDonald'swentontoreinstateauto-enrollment in 2005, but only for its managers who likely represented a lesstransientworkforce,therebyavoidingsomeofthepitfallsoutlinedabove.Inorder tounderstand thepowerofauto-enrollment, letusexaminemoreof

this featureandhow itoperates.Essentially, insteadof requiringemployees tomakeaproactivedecisiontoenrollintheirretirementplan,auto-enrollmentdoesexactly the opposite. It assumes that an employeewants to enter the plan andmakesthedefaultdecisionthattheemployeeisparticipating.So,asanemployeein a plan that has auto-enrollment, you are automatically saving in the planunlessyouoptout.Theobjectiveistotakeadvantageofemployeeinertia,whichmeansthatemployeeswhoaredefaultedintotheplantendtoremainthere.Does auto-enrollment work? It most certainly does. Opt-out rates for those

whoaredefaultedintotheirretirementplansarelessthan5percent,accordingtoa July 7, 2011, article written by David Wray of Plan Sponsor Council ofAmerica(PSCA).Also,asapointofreference,againaccordingtoPSCA,almost42percentofplanshaveanautomaticenrollmentfeature.Thereremainssomecontroversyovertheuseofauto-enrollment,thecriticism

being thatsomeemployeesaresaving lessmoney thanotherwisemightbe thecaseiftheyweretovoluntarilyenroll.The main problem, however, lies in the fact that, according to the Profit

Sharing Council of America (PSCA), a staggering 74 percent of plans withautomatic enrollment default participants to 3 percent or less,which is simplynotenough.TheProfitSharingCouncilfoundthatapproximately62percentofplansthatauto-enrolluse3percentasadefaultrate.Why?WhilethePPAallowsforhigheremployeedeferralratesunderauto-enrollment,perhapsemployersarereluctanttosetthemhigherforfearofemployeecomplaints,drivingupopt-outrates, and possibly increasing the cost of the plan itself. Only a minority (26percent)setthedefaultrateat4percentandabove.During our interviews, Catherine Collinson, President of the Transamerica

CenterforRetirementStudies,providedinsightonacoupleofkeyissuesaroundauto-enrollment:Ifyoulookatwhoauto-enrollmentisgoingtopullintoaplan,it'smostlikelythe lower income employees. So what are you doing? You're pulling thatperson in at 3 percent. That's a moral hazard because it is implying thatsaving 3 percent is enough, which it most certainly is not. It's also pullingthem in at 3 percent without adequate messaging about the Saver's Credit,whichapproximatelythreeoutof fourpeoplearelikelytomissbecausetheydon'tknowaboutit.While 3 percent may seem like the wrong answer today, can you imagine

trying tobreakgroundon this idea?Coincidentally,Mark Iwrywaspresent at

thegroundbreakingandshareshisstoryabouthow3percentbecamethego-todefaultrate.In 1998 when I was at Treasury in a previous incarnation, we decided todefinesomethingcalledautomaticenrollment,describeandapproveitunderthe 401(k) rules, and then actually promote it.We issued a rulingwith a 3percentauto-enrollmentlevelforinitialcontributionsasanillustrationoftheidea. It caught on pretty slowly. In fact as I tried to encourage the privatesectortodoit—otherthanthefewwhohadbeendoingitpreviouslywithsomehesitations because they didn't know if itwas legal or not—not awhole lotmore joined in. The industry was not supportive...generally there wasindifference, lukewarm support at best; mild opposition was probably thedominantreaction.”That's right: the3percentdefault rate that issocommonlyused today is the

result of an illustration, not something that was meant to be accepted as arecommendation,yetthat'spreciselywhathappened.Our contention is that auto-enrollment has taught us a great deal about

participantbehaviorandhassuccessfullyaccomplishedwhatwehaveaskedofit.Nowwejustneedtochangewhatitisweareaskingfor.Thecurrentsituationwithauto-enrollment is that it isensuringmoreemployeesenroll in theirplansbut at a deferral rate that is far too low to move the needle with respect toretirement readiness. The answer seems so simple—just increase the auto-enrollment default rate and the results will improve. And, indeed, there isbuildingevidencethatincreasingthedefaultratebeyond3percentdoesnothavethepreviouslyanticipatednegativeimpactofincreasingopt-outrates.Infact,itseemstohaveverylittleimpactatall.InaJuly15,2011,releasetitled,FidelityThoughtLeadership:Auto-EnrollmentandWSJArticle:TheRestof theStory,Fidelitysharedtheirexperiencethat“roughly90percentofAEeligiblepartsdonotoptout—regardlessofhowhighthedefaultdeferralrateis.”[Note:“AEisanabbreviationforauto-enrollmentand“parts”forparticipants.]

ThePowerofAuto-EscalationLet's now leave automatic enrollment aside and turn to the second contextualplandesignfeature:automaticescalation.Essentially,auto-escalationbuildsontheinitialdeferralpercentageselectedby

the employee or established by the employer in an auto-enrollment plan. For

example, if the employee begins at 3 percent, auto-escalation will increase itfromthere.Thistoocanbeapowerfulforce,becauseitalsotakesadvantageofbehavioralinertiatoincreaseparticipantdeferralratesautomaticallythroughouttheirtenure.AccordingtothePSCA,auto-escalationispresentinjustunder38percentof

auto-enrollmentplans,whichmeansthatthecombinationofauto-enrollmentandauto-escalation, which is critical to creating a context conducive to a fullyfundedretirement,isonlypresentinabout16percentofplans.And,ofallplanswithautomaticescalation,themajority(57percent)capitat6percentofpayorbelow.Since theamountanemployeedefers into their retirementplan isamongthe

most important determinants of ultimate retirement readiness, let us sum upthese automatic features and what the average auto-enrollment plan might beexpectedtoyield.As outlined above, 42 percent of plans automatically enroll employees.

Seventy-threepercentoftheseuseadefaultdeferralrateof3percentorlessandonly38percentof themuseanauto-escalationfeature,with themostcommoncapbeing6percent.Keepinginmindthatthemediantenureofanemployeeisapproximatelyfiveyears,thisishowitwilllikelyplayout.Imagine you are a participant in the average auto-everything plan.Youwill

likely be enrolled at 3 percent and remain there until you terminate youremployment,sinceauto-escalationiscurrentlytheexceptionratherthantherule.If you are lucky enough towork for a companywith the foresight to includeauto-escalation, thenyour3percentmightbeescalated1percenteachyearforthenextfouryearswhen,atleastaccordingtothestatistics,youaremostlikelytoendyouremploymentwith thatcompany.Roughlycalculated,youraveragecontributiontothatplanwouldbe5percent.Attheselevels,whetheryouhaveauto-escalationornot,yourauto-enrollmentplanisnotdesignedtoprovideyouwithenoughmoneyforasecureretirement.Although,shouldyouchoosetodoso,youcouldalwaysincreasethelevelofyourcontributions.Howmighttheabovenumberschangeifweweretogetabitmoreaggressive?

Let's use the example of an auto-enrollment rate of 6 percent, with 2 percentannual escalations, and a cap of 12 percent. Over that same five-year tenure,yourcontributionwoulddouble,averagingcloseto10percent,whichisamuchmorereasonabletracktoaretirementreadyfuture.

QualifiedDefaultInvestmentAlternativeHaving reviewed auto-enrollment and auto-escalation, let us now turn to thethirdautomaticenrollmentfeature:thedefaultingofinvestmentsintoaQualifiedDefaultInvestmentAlternative(QDIA).If theamountanemployeedefers into theirplanis thenumberonedriverof

retirementreadiness,anotherveryimportantfactorishowthatemployeeinvests.Aswehaveoutlinedthroughoutthisbook,thevastmajorityofpeoplestruggletoknowhowtobestinvesttheirownretirementaccounts.Again,somehelpfulnewscamewiththePensionProtectionAct.Itestablished

the concept of the QDIA that, simply stated, says an employer can default aparticipant into an appropriate investment without the risk of being sued,provided that certain qualifications are met. The relief from liability becameavailable under Section 404(c) of ERISA (the previously mentioned 1974landmarklegislation).PriortothePensionProtectionAct,Section404(c)reliefwasonlyavailablewhenaparticipantselectedtheirowninvestments.This new development provided an important tool for the industry to begin

moreaggressivelydefaultingemployeesintothekindofappropriateinvestmentsthat theywould be less likely to select on their own. In addition, it providedrelief for plan sponsors who offered auto-enrollment in their plan and used aQDIAasthedestinationfordefaultedemployeedeferrals.QDIAsgenerallytaketheformofafundorsolutionwithabalancedcombinationofinvestmentssuchas stocks, bonds, and cash, and consider both age and risk tolerance. Theseinvestmentsareoftenreferred toasbalanced, targetdate,or lifecyclesolutionsand theyhavegained inpopularityasa resultof theadventof theQDIA.Forexample, according to EBRI/ICI 2010, usage of target date solutions amongrecentlyhiredemployeeshasjumpedfrom28.3percentin2006to47.6percentin2010.These three automatic plan features—auto-enrollment, auto-escalation, and

QDIA—haveproventobepowerfulcontextualdriversofsavingsbehavior.Withjustasmalladjustmenttotheratesatwhichweauto-enrollandauto-escalate,wecouldhaveadramaticimpactonretirementsavingsratesintheworkplace.But let us not forget that we live in a messy, complex world in which the

unexpected often happens.Which brings us to our next topic: the leakage ofsavingsfromexistingplans.

LeakageWe know that the earlier you begin saving the easier it is to secure yourretirementand that theability tocommit to savingoveranextendedperiodoftime,uninterrupted,iscriticaltooutcome.That'stheidealscenario.Whatislessthanidealiswhatisknownasleakage.Intheretirementsystem,

this comes in the formofemployee loans,hardshipwithdrawals, andbalancesthat are not rolled over when an employee changes jobs. Each of thesechallenges means that considerable assets are effectively leaving an alreadyunderfunded retirement system. In order for us to successfully increaseretirement readiness, we not only have to increase savings, we also have tominimizethisleakage.Buthow?Inthe112thCongress,billswereintroducedinboththeHouseandtheSenate

to help reduce leakage from the defined contribution retirement system. TheSEAL Act—Savings Enhancement by Alleviating Leakage in 401(k) SavingsActof2011—proposedkeychangesdesignedtokeepretirementsavingsinthesystem,including:

Theextensionof therolloverperiodforparticipant loansin theeventanemployeeloseshisorherjob.Typically,outstandingloanbalancesaredueuponseparationfromserviceandifnotpaidback,taxesandtaxpenaltiesaredue. The ability for 401(k) participants to make contributions to their planduring the six months following a hardship withdrawal. Current lawprohibitsparticipantcontributionsduringthisperiod.And,theoutlawingofthe401(k)debitcardswhichencourageparticipantstotreattheiraccountsliketemporarysavings.Whiletheseproposedchangescannot,inandofthemselves,eliminateleakage

fromtheretirementsystem,theydorepresentthekindofthinkingnecessarytomakeanimpact.Inaddition,employersandindustryneedtodesignplanswithleakage in mind. Simple examples like limiting loans to one per participant(whichwasalsooriginallyintheSEALAct),orsettingdefaultstorollassetstoanIRAuponseparationfromacompany,maymeaningfullyreduceleakageandneedtobeexplored.Anotherchallengeweneedtotakeintoaccountconcernsthelengthoftimea

planparticipantmightlive,beyondtheaverageestablishedbyactuarialstudies.

LongevityUp to this point we have discussed the contextual factors involved in drivingsavings and investing behavior while employees are working, collecting apaycheck, and accumulating assets for retirement. Butwhat happenswhen anemployee retires and needs to ensure their savings will last for a lifetime,especially when the length of that life cannot be predicted? The challenge ofmakingone'smoneylastiscommonlyreferredtoaslongevityrisk.Ironicallytheone thing we all desire—to live a long life—can also represent our biggestchallengeinfinancialterms.Thefactismostofuswilleitheroutlive,orfailtoreach, our life expectancy, and often bymore than just a few years. Sowhathappensifweplanonlivingto86,yetenduplivingto100,oreven104?As previously discussed, because many defined benefit plans promised

paymentsforalifetime,theyalsohelpedtomitigatethisriskofoutlivingone'sincome.Definedcontributionplans,on theotherhand,donot.Thisdifferencebetween the twohasbecome increasingly importantwith the trend towardDCplans and away from traditional DB plans. In a recent report released by theExecutive Office of the President—Council of Economic Advisors, thechallengeissummarizedasfollows:In1980,71percentofprivateemployer-sponsoredretirementplanassetswereheldinDBplans(includingcashbalanceplans),butby2009,60percentofthese assets were held in DC plans.While 401(k)-type plans offer workerssome important advantages—such as portability, high potential for growth,andflexibility—theshiftto401(k)-typeplansalsohastransferredsubstantialriskfromemployerstoworkers.TheaggregateshiftfromtraditionalDBplansto 401(k)-type plans and hybrid DB plans highlights the problem ofdiminishedprevalenceof lifetime incomebenefits.This trend is exacerbatedbylump-sumpayoutsfromdefinedbenefitplans.Onestudyfoundthat,amongthoseofferedthechoiceinatraditionalDBplan,73percentelectedtotakealumpsum(MottolaandUtkus2007).Thereportgoesontodiscussthebenefitsofannuitiesandhow,“Annuitiescan

helptomitigatesomeoftheriskfacedbyretirees.Inparticular,annuitiesprotectretirees against the risk of outliving assets.” It then introduces the term, theAnnuityPuzzle,whichmeansthatinspiteoftheirrisk-mitigatingproperties,foramyriadofreasonsannuitiesaresimplynotbeingusedinameaningfulwaybyretirees. The report ends with recommendations for “Removing Barriers toAnnuitization”“byeasingandsimplifyingregulationsthathavelimitedlifetime

income.” For those interested in further exploration of this topic, there issignificant activity around the concept of lifetime income and consequently aplethora of information available. A good starting point might be the reportreferencedearlier.Whileannuitiesmayrepresentapartialsolutiontothechallengeoflongevity,

theyarelikelyonlypartoftheanswerthatwillemergeasaresultofthecurrentfocusonthisveryseriousissue.To summarize our aspiration: a new vision for retirement readiness has to

begin with coverage in order to ensure that every American worker has theability tosaveinaworkplaceretirementplan.Wethenturntobehaviorwithinthe plan itself and look to Professor Benartzi'smodel (90–10–90): 90 percentparticipation in the plan; contributions at 10 percent of pay; and 90 percentinvested in a fullymanaged solution. Additionally, the industrymust work tolimit leakage from plans to ensure assets remain committed to retirementsavings, and retirees need to be aware of longevity risk and be exposed tosolutionsforincomethatcannotbeoutlived.But let us now revisit the work around litter in America by KAB and the

BBC'sTheYoungOnes study.While context is a powerful driver of behavior,people's beliefs are indeed needed to bring about sustained change.When thehelperswerebroughtintoassistthecelebrityvolunteersintheTheYoungOnesprogram, that simple, well-meaning change of context resulted in retrogradebehavior. Similarly, if we know that the median employee tenure isapproximately five years, during which time employees may have beendefaulted into plans with no need for them to think personally about theirretirement,thenwhathappenswhentheychangejobs?Thecontexthaschangedbut,withoutthenecessarybeliefaroundsavingfortheirretirement,whataretheodds that all of these employeeswill keep their savings intact and continue apro-savingbehavior?Context varies over time, aswe have pointed out before:wemarry, take on

moredebt,havechildren,changejobs—alloftheseareaninherentpartoflifeinaddition to the increasing churn and flexibility exhibited in today'sworkplace.Whileautomaticplanfeatureshelpbringmorepeople into thesystem, theydonotnecessarilyinculcateinthemgoodsavingshabits.Forthat,wehavetoturnback to beliefs which, in relation to retirement readiness, means helpingAmericans see the advantages of taking responsibility for their own lives andfosteringinthemtheresolvetosustainthosebeliefsuntiltheybecomehabitual.Beliefsarethefocusofthenextchapter.

Chapter8

BeliefsandResolve

Thebesttimetoplantatreewas20yearsago.Thesecondbesttimeistoday.—Chineseproverb

Itwasthefirstandonlytimeinhis32yearsasafinancialadvisorthatJohnMotthadexperiencedanythinglikeit.Typically, his enrollmentmeetings ormonthly reviewswould go something

like this:Acompanywouldaskhimtofly inonaSundayevening inorder toprepareforall-daymeetingswiththeiremployeesthenextday.Onthisparticularoccasion some 250 employees at one location had been told that Mott wasavailable tomeetwith themone-on-one todiscuss the company's401(k)plan.The company had freed up each employee for 30 minutes because, withparticipation currently low—at around 40 percent—the plan sponsors realizedthatthisinformationaleventwassorelyneededtomaketheadvantagesofsavingforretirementmorewidelyunderstoodandaccepted.Thoseindividualmeetingsweretobefollowedupwithacompanywideget-togetheratanearbytheaterthenextday.ToattendtheTuesdayeventallanemployeehadtodowastocollectanexplanatorypostcardandsignup.Mondayarrived.Johnsawfourpeopleforhisone-on-ones—outofapotential

150employeeswhowerenotyetparticipatingin the401(k)plan.Hisdaywasoverby10:30a.m.Onlyoneofthoseindividualsactuallywantedtotalkaboutretirement.Therestused theopportunity toaskgeneralquestions,since itwasthe first time they had ever sat down with a financial services expert. Onewomanwantedtoknowhowshecouldgether twogrownsonswhostill livedwithhertostartpayingrent.Tuesdaycameandthingswerenotmuchbetter.Onlyeightemployeesshowed

up at the theater, all youngmenwho had been told by their parents that theyneededtofindoutmoreabouttheircompany'spensionplan.Ask any of those who have ever tried to engage employees during these

enrollment meetings and they will tell you that oftentimes people come justbecausethereisfreefood.

AskJohnMottwhyhethinkssofewpeopleareinterestedtolearnabouttheadvantagesofsavingmoneyfortheirretirement,especiallythosewhoareclosesttoreachingthatpointintheirlives,andhesays,“Youknow,it'sinteresting.Theolder generation, if they're not in the plan, they're not getting into one. Theythinkit'stoolate.AndIdon'tknowhowyouchangethosebeliefs.”Yet that was not an issue at a different company John told us about, an

experiencethathasstuckinhismemoryeversincebecauseofitsuniqueness:The president of this company took it upon himself to get as many of hisemployeesintotheplanashecould.So,beforeourmeetingshewouldstandupandhismessagewas,“Youknowwhat?IhiredyoubecauseIthoughtyouwere smart and if you're not in this plan then you're not that smart,” andeverybodygotinbecausehewasthepresidentwiththeabilitytohireandfire.Callitwhatyouwill,butwealmostgotupto100percentparticipationduringthoseseriesofmeetings,justbecauseofwhathesaid,thebottomlineofwhichwas“youguysareidiotsifyou'renotinthisplan,andIdidn'thireidiots.”Thereisachasmamilewidebetweenthosetwoformsofleadership,bothwith

regardstotheirbeliefintheimportanceofretirementsavingsandtheirresolveinensuring that eachemployee takesadvantageofwhat isbeingoffered.But, aswithourearlierdiscussionaroundauto-everything,andthelearningfromEllenLanger's Counterclockwise research on what happens when decision-makingresponsibilityistakenawayfromindividuals,theremaystillbesomedownsideto the approach of thatwell-meaning president, although not asmuch aswithplansponsorswhotakeamorerelaxedattitudearoundplanparticipation.Retirement savings does not constitute a single event. It's not as simple as

making that first good investment decision and you are done. Changing jobs,major life events such as getting married or having children, and taking onbiggerfinancialcommitmentswhilewearestillworking,allimpactwhetherornot that initialdecision remainsvalid;usuallynot.Whichmeans thatwhatweoriginallyoptedtodoarounddeferralratesforourretirementsavingsplanneedstobere-assessedonaregularbasis.It'sonethingtohavethatfirstparticipationdecisiontakenoffourplates,becauseweknowthereisvalueinauto-enrollment.Butwhenyoucombinethatwiththecurrentlackoffinancialliteracyoverall,thelikelihoodisthatthemoneywehavesavedisultimatelynotgoingtomeetourretirementneeds.

TheIssueofStakeholderResolveEarlier, whenwe discussed the importance of financial literacy, we looked atretirementreadinessthroughthelensofalackofknowledge.Inthischapterwearegoing todigdeeper intohowthis issue is impactedbyresolveandbeliefs.This is not just about the beliefs and resolve of individuals, but of allstakeholders—theplansponsor(employer),industryadvisors,andpolicymakers.Specifically,wewantedtogetahandleonwhetherornotwearewilling—asa

societyandindividually—tochangeourbehavioraroundsavingforretirement,aswell asdowhat is needed to support that change. In short, dowehave thepersonalresolve,corporateresolve,andpoliticalresolvetochangeourapproachtoretirementreadinessinameaningfulway?But before doing that, let us look at two topics, beliefs and resolve, and in

particulartherelationshipbetweenthem.If we consider John Mott's earlier hypothesis about why older employees

choose not to get into a retirement plan, because they think it's too late, it'sobviousthatbeliefsplayaroleinstrengtheningorweakeningourresolve.Infactthere is one type of belief that psychologists call self-efficacy that seemsparticularly relevant here.Originally coined byAlbertBandura in his seminalpaperentitled“Self-Efficacy:TowardaUnifyingTheoryofBehaviorChange,”self-efficacyreferstothebeliefsweholdaboutwhatwearepersonallycapableofdoingunderchangingandchallengingcircumstances.Self-efficacy beliefs are said to be “the most important determinants of the

behaviors people choose to engage in and how much they persevere in theirefforts in the face of obstacles and challenges.” Self-efficacy beliefs, then,impactourresolve.Thesebeliefsoriginateinchildhoodwherewefirstdevelopthecapacitytounderstandcause-and-effectrelationships,andaremodifiedovertimeaswediscover theextent towhichweareable tomanipulateandcontrolourexternalenvironment.While getting a person to articulate their beliefs as they relate to savings

behavior can be quite difficult, because often they are subconscious, this isclearly an area where actions speak much louder than words. Watching anindividual's(orsociety's)behaviorandwhattheyareresolvedtodoprovidesuswithaclearwindowintotheirunderlyingbeliefs.So with that focus in mind, let us look at the issue of resolve regarding

retirementreadinessforthefollowingstakeholders.

IndividualResolveHistorically, oneof thebiggest fearswe face aswegrowolder is becoming aburdenonourfamilies.Avoidingthatoutcomedoesn'thappenbyaccident;ithastobeplannedfor.Wherethemoneycomesfromtodothat,ofcourse,hasalwaysbeenachallengeformany.Itisjustthatthechallenges—orshouldwecallthemwhattheyare,thetemptations—wefacetodayareincreasingandinsidious.Thereare thingswespendmoneyon today thatwedidn'thave10oreven5

yearsago.WearenolongerlookingonlyatcableTV(figurativelyandliterally),but access to the Internet. It used to be just a cell phone bill but now it isiPhones,iPads,ande-readers,allofwhichcomewithdataplansthatnudgethosebills to $1,200 a year or more. It takes considerable resolve on the part ofindividualsthesedaysnottogetcaughtupintherunawayconsumerismthatisnowthesocialnorm.Andinstarkcontrasttotheexperienceofourparentsandgrandparents, theeraofeasyaccess tocreditmeans thatweno longerhave tosavetobuywhatwewant,wecanhaveittoday—justbyputtingthatpurchaseonourcreditcards.Thereareplentyofalarmingstatisticstomullover:AccordingtotheFederalReservereportonconsumerdebtreleasedinJuly2011, totalU.S. revolvingdebtwas$793.1billion, 98percentofwhich ismadeupofcreditcarddebt. Those households with credit card debt carry an average outstandingbalanceof$15,799.Theaverageconsumertodaywillhave13creditobligationsonrecordatacredit reporting agency,9ofwhich are likely tobe credit cards, includingdepartment store charge cards and bank cards, plus four installment loanssuchasautoloans,mortgageloans,andstudentloans.AswepointedoutinChapterOne,Boomersmayhaveearnedmore,butthey

have also spent more and as a consequence acquired considerably more debtthantheirpredecessors.ButaU.S.savingsrateclose tozerodoesn't trulyshinea lightonwhere the

biggestissuelies.FormerChiefEconomistoftheWorldBankJosephE.StiglitzpointedthisoutinaVanityFairarticleontheeconomiccrisis,writing,“Here'sthereality: intheyearsleadinguptotherecession,accordingtoresearchdonebymyColumbiaUniversitycolleagueBruceGreenwald,thebottom80percentof the American population had been spending around 110 percent of its

income.”How much of that were we individually spending on securing our future

retirement?Preciouslittle.Withfiniteresources,themoremoneythatgoesintocreatingdebt,thelesswe

havetofundourretirementsavings.Partofourresolve,then,istoconsiderwhatthatnewsmartphoneanddataplaniscostingus,not justover thecourseofalifetime,butinrelationtothelostopportunitiesfromfailingtosavesufficientlyforretirement.Inallhonesty,howmanyofuseverdothatmath?The contagion of consumerism in our country today is such that one of our

interviewees described how, in his neighborhood, the minute one householdinvested in a large-scale expansion of their home, everyone else in the areafollowedsuit.This epic battle between consumerism and saving plays out in many ways.

Becauseofthewaywehavefirmlyestablishedourselvesasaspendingsociety,organizationsthatareencouragingustosaveareoftendoingsoontheheelsofconsumerism.Thisengendersthefeelingthatwearemoreresponsiblespendersifpartofthatmoneycomesbacktousinsomeformofsaving,asisoftenseenwith cash rebate programs, some of which may even end up in our savingsaccount.Additionally,ourmailboxes(physicalandelectronic)arefullofofferstellingusthatbyspendingover$500onitemXwecansave50percentonitemY. It is hard not to feel overwhelmed by the sell side of our culture andmisinterpretthisastheonly(oratleastthemain)wayinwhichwecanactuallysavemoney.Unfortunatelythisisnotacut-and-driedissue;thereisnosimplesolution.As

Nevin Adams pointed out, with respect to his recent purchase of the latestiPhone:Irememberhavingthediscussionwithmywifeaboutit.Ifeltbadabouthowmuchthephoneitselfwascosting,letalonethedataplans.Butasshepointedout,that'spartandparcelofhowIworkthesedays.Essentially,togowithoutitwouldincreasemyleveloffrustrationbecauseitwouldmeannotbeingabletodoallthethingsfrommyphonethatInowtakeforgranted.Any service-focused entrepreneur or constantly traveling salesperson or

executiveknowsexactlyhowhefeels.ButwhataboutwhenwearecompelledtotradeinourstandardTVforthelatest3Dplasmaset,whichcannotbejustifiedasanecessarypartofhowwedoworkinthetwenty-firstcentury?Dowereallybelievethatmostpeoplefullyconsiderwhethertheycanafforditemslikethese,

orcontemplatehowtheyarefailingtoinvestintheirfutureretirementasaresultoftheirpresent-dayspending?Yetwhenitcomestoourself-efficacybeliefsaroundretirement,agreatmany

people that theadvisorsandother industryexpertswespokewithencounteredreacttotheadvicetosave6oreven10percentoftheirincomebeforetaxwith“Ican'taffordtodoit.”Thatresponseimmediatelynegatesanyresolvetoquestionthatperspectiveortakeanyactiontoseeifitcanbecontradicted.Maybethishassomething todowithour tendency tobelieve that spendingand savingareonoppositeendsofacontinuumandthatit'sacaseofeither/or?Yet with some people like Amy Haley, whomwe introduced in Chapter 1,

there is a balance that can be struck between sensibly setting aside a certainpercentageofincomeonaregularbasisandenjoyingdailytreatslikeabreakfastburritoordecentcupofcoffee.ThePresidentofMoretonRetirementPartners,ChadLarsen,agreesthatwhen

it comes to the resolve to save, it is not an either/or argument.Yet erroneousbeliefspersistamong theemployeegroupshemeets.Everyonehespeakswithsaystheybelieveitishardforthemtosavemoney.ManygetupsetwhenLarsencountersthatbysuggestingthatsavingmoneyhasnothingtodowithaperson'sincome.Ashegoesontopointout,weallknowsomebodywhomakeslotsofmoneybutcan'tseemtosaveadimeofit.“If it were just about making more money those people would be greater

savers,andthey'renot,”saysLarsen.“ThenIexplainthatI'vealsoworkedwiththousandsofpeopleover theyears thatmakenext tonothingwhoconsistentlysave3,4,5...sometimesasmuchas7percentoftheirincome.ButIdon'tbelieveyou'reeitheraspenderorasaver.”Thenwhyarewenotbetter—collectivelyaswellasindividually—atachieving

a balance between enjoying life in the present while also, like Amy Haley,shoringup the freedomandsecurity thatanadequately-funded retirementplanprovides?Perhapsit'snotjustaquestionofhavingtheresolvetolivewithinourmeans,

buthavingabetterhandleonwhatweare looking toachieve in termsofhowmuch we need to be saving for retirement. For the vast majority of us, theworkplace serves as the critical place to strike a balance for doing this. Thatassumes thatwehave access to aworkplace retirementplan in the first place,however. So what beliefs and resolve are prevalent when it comes to theemployer'ssideofthisequation?

PlanSponsorResolveWhile there are many great examples of employers who take theirresponsibilitiesveryseriously,unfortunatelynotallofthemmakethelong-termsecurity of their employees a primary focus. Some lack the basic financialliteracy,atleastinrelationtotheretirementplantheyarepromoting,thatwouldenablethemtomakegooddecisionsonbehalfoftheiremployees.Forexample,oneofourintervieweessharedhowhewastalkingwithagroupofCEOswhowere responsible for running their retirement plans about adding automaticenrollmentwhenoneofthemasked,“What'sthat?”Whileit isunderstoodthatnot everyone knows the intricacies of plan design, a plan sponsor'sunderstandingofthefeaturesthatdriveretirementreadinessiscritical.Thesamelackofresolvethatplaguesparticipantsisoftenexperiencedatthe

plansponsorlevel.AccordingtoNevinAdams:Plansponsorshaveaninertiaproblemandtheytendtolooktothemiddleofthe pack because they've all seen the movie about what happens to thewildebeest that wanders away from the herd. They don't want to be thatwildebeest.So they'reall looking for the same sweet spot, themiddleof thecrowd,whereeverybodyelseis.Andwherethatis,certainlyafterthePensionProtectionAct,istostartpeopleinat3percent.Asmentioned in thepreviouschapter, the3percentAdams is referring to is

therateatwhichmostplanswithautomaticenrollmentdefaulttheirparticipantsintotheplan—aratethatisjusttoolowtoproducearetirement-readyemployee.AsAdams points out, some plan sponsors are goingway beyond that,with agrowingnumberof employerswilling to ratchet auto-enrollmentup to the fullmatchlevelandbeyond.Butinatougheconomythatcanbeachallengingcallto make, as some employers are already struggling with maintaining theirexistingcontributionsandotherbenefits.The fact is, increasing participation levels also increases an employer's plan

costsoverall,soittakesconsiderableresolveontheirparttopaymoreforplanexpenses and potentially more for employer matching. And as several of ourexperts admitted, convincing an employer that increasing their employermatchingcontributionsorattractingmoreemployees to theirplanwillmake itincreasinglylikelythattheywillengagebetter,longer-termemployees,needstobebackedupbydata,datathathasbeenhardtocomeby.Nevertheless, there is growing evidence to support the importance of

retirementbenefits totoday'semployees,evidencethatstronglyimplies thatan

employerwillberewarded, throughemployeeloyalty,forastrongerresolvetotheiremployeeretirementplan.Forexample,whenemployeeswereaskedaboutthe importance of workplace retirement benefits in the Thirteenth AnnualTransamerica Center for Retirement Studies Survey, “The vast majority ofworkers (90%) value retirement benefits as important—61 percent sayretirement plans are ‘very important.’” In fact, “retirement benefits hold suchgreatimportanceamongworkersthatmorethanhalf(53%)saidthattheywouldleavetheircurrentemployerforanearlyidenticaljobwithasimilaremployerifitofferedbetterretirementbenefits.”Itstandstoreasonthatifemployeeswouldleaveforbetterretirementbenefits,theywouldalsostayforthem.Butbeginninganydiscussionaboutresolvebyfocusingonhowplansponsors

canincreaseparticipationandemployeedeferralsisabitlikestartingabikeraceonthelastclimbbeforethefinish.Wherethismayverywellbewheretheraceiswon,itmostcertainlyisn'twheretheinitialfocusmustbeplaced.Beforewecanhave the discussion about participation rates in aworkplace plan, we have tostartbyensuringthatthereisaplaninwhichtoparticipateinthefirstplace.Aspreviouslydiscussed,therearestillagreatmanyemployerswhodonotsponsora retirement plan and, as a consequence, a greatmany employeeswhodo nothave the ability to save in the workplace. So, resolve really starts with anemployerensuringthattheiremployeesareofferedthisopportunity.Until employers strengthen their resolve around their responsibility to

encourageemployees tosavefor their retirement,wewillmakescantprogressaround the issue of retirement readiness. The extent to which employersprioritize this important topic does profoundly impact the extent towhich theAmerican worker embraces it. Prioritization starts with offering a plan andcontinueswith driving savings behavior.We need to recognize that therewilllikelybemorecostandeffort involvedindoingitright,butalsotheoneplacethat the average American has succeeded in saving for retirement is theworkplace.Many employees are still without a workplace retirement plan and most

employersthatdoofferplansarenothavingthetoughconversationstogetthemtoparticipateattheappropriaterates.So,wheredoestheresponsibilityforthiseffort lie?Perhaps it startswith less timidityandmoreblunthonesty from theretirement industry itself.Because, as JohnMott pointed out, he's never comeacross another company leader willing to say what that president said aboutexpecting the smart people he hired to also be smart about their retirementoptions;everyoneelseseemstobesignificantlymorecautiousintheirapproach.

IndustryResolvePaulHenry isManagingDirector,RetirementClientsandProducts,atLIMRAInternational:Ihaveoftenthoughtthatasanindustrywe'vefocusedonthewrongthingsintermsofthedialogwehavewithemployersabouttheirplans.Whentheyhavea75percentparticipationratewesay,congratulations,you'redoingjustfine.Whatwerarely,ifever,talkaboutwiththeseemployersishowmanyoftheiremployees are on track to replacing half, maybe even 60 or 70 percent, oftheirincomeinretirement.Shouldn'tthatbethemeasureofplanhealth?Whenconsideringtheissueofresolveandthebeliefsthatsupportormitigate

it,much comes back towhatwe discussed in the State of theUnion chapter:whatisourgoal,ourvision,asanindustry?Ifitistogetpeopleonthepathtofinancialsecurityduringretirement,thenweneedanewparadigmaroundwhatconstitutesplanhealth.Thisisnotamessagethatiswellservedbytimidity.Thereisagrowingbodyofindustryprofessionalswhoarewillingtovisitwith

plan sponsors and say, “Here'swhatwebelieveyou shoulddowith respect toyourplan.Youhavearesponsibilitytomanageyourplantooptimizeretirementreadiness,whichmeansgoingwitha6percentversus3percentauto-enrollmentplan, employing auto-escalation, or simply designing your plan formaximumparticipationbywhatevermeanspossible.Weareemphaticallysayingthatthisistherightanswerforyouremployees.”Are enough of these conversations going on right now? A number of our

industryexperts felt therewerenot,andperhaps thereason is that,asmuchaswewould like it to be the case, there is no one-size-fits-all solution.But thatshouldn't deflect us as industryprofessionals frombeingmore forceful aroundwhereweseepossibilitiesforimprovement.To illustrate what we mean, consider this example from former Managing

Director at IBM Retirement Funds, Jay Vivian. Let's say that Company Ainstitutedauto-enrollmentandnowhas90percentparticipationintheirpensionplan; only 10 percent of employees have chosen to opt out. Compare that toCompanyBwheretheparticipationrateisonly60percent.Whichcompanydoyouconsider tobe themost successful in thepensionplan stakes?YouwouldthinkCompanyA,right?Theproblemis,weknowthatwithauto-enrollmentpeoplearen'tasengagedin

theplan.Sowemightlookatthesetwocompaniesinfiveyears'timeandfindthat the auto-enroll company still has a participation rate of 90 percent, but

almost all of the employees are still only at 3 percent deferral. WhereasCompanyBisupto70percentparticipationbutaveragedeferralrateisup,onaverage,to6percent.Fromtheperspectiveofwhattheoverallgoalis—securityduring retirement—company B's employees are in much better shape thancompanyA's.But,unlesswe'reveryclearontheoutcomethatasanindustryweareinbusinesstobringabout,we'realwaysgoingtobesidetrackedbythewrongnumbers.Andwhere industryresolve isconcerned,wearefrequentlyfocusedonwhat

fails to make a real difference, although to myopically focus on industry isperhaps thewrongunitofmeasurementhere.Theretirement industry, likeanyother,ismadeupofpeople.Itisnotonlythedegreetowhichindustryiswillingtodeliverthemessage,butalsothedegreetowhichtheindividualswhomakeupour industryareprepared togivestrong,honestguidance toplansponsorsandparticipantsthatrepresentsthebeliefsandresolveweneedtochangeourcurrentsavingsculture.These frank individuals, whom Charlie Ruffell collectively calls the 401(k)

Whisperers,arepeople likePaulD'Aiutolo,aplanadvisorwithUBSFinancialServices.Earlyoninhiscareer,oneofthefirstpeopleD'Aiutolosatdownwithduringa

one-on-onewasawomaninhermid-sixtieswhoworkedatanursingfacility.Asshegotolder shewas finding theworkharder todo, thekindofheavy liftingwork that involves removing patients from their beds to sit in wheelchairs,takingthemtothetoilet,andchangingtheirclothes.Shewaslookingforwardtoherretirementverymuch,andhopefullyverysoon.D'Aiutolo asked her to tell him about her lifestyle and they began going

throughthenumbers.Shewouldonlygetaround$800–900amonthfromSocialSecurity because of her paygrade and the fact that she had startedwork laterthanmost.Herretirementassetsstoodat$23,000total.Butherexpensesrantosomethinglike$3,000amonth.D'Aiutoloexplainedthatthebestshecouldhopeforifsheretiredrightthen,asshehadexpectedtodo,was$1,200amonth.Withnothingelsetohernametherewasnowayshecouldmakeupthatshortfall.Shewouldhavetokeeponworking.“FrommyperspectiveIfeltlikeIwasanoncologisttellingsomeonetheyhad

cancerandonlyoneyeartolive,”recallsD'Aiutolo.“Wejusthavetodobetter.Wehavetodobetterasanindustrytonothavepeopleinthatposition.”That's thepassion that drives a401(k)Whisperer.These are thepeoplewho

are concerned with doing what truly moves the needle toward retirement

readinessandunderstandingwhatplanparticipantsandplansponsorsneedandwhy. According to D'Aiutolo, as an industry we are missing the mark. Ourresolve is often to sell products and services instead of solving problems, tofocuson toolsandfeaturesand toobsessoverproductdifferentiation,whereasweshouldbefocusedonencouragingmoreemployeestosaveandinvestwiselyfortheirfuture.D'Aiutoloandthemanyother401(k)Whisperersweinterviewedforthisbook

knowwhomtheyareinbusinesstoserve.“Myjobistosolvetheproblemsofthelittleguysothattheycanultimatelyretiresomeday,”D'Aiutolosays.“Ithinkthat'swhatweintheindustryhavetodoandlargelywejustdon't.”Evenastheretirementindustryrefocusesonthoseweareinbusinesstoserve,

weneedtocreateacompellingmessagearoundretirementreadiness,onethatisbrand agnostic with respect to our individual desires to promote productawareness and sell business. This message cannot come from industry alone.Werethat tohappenwewouldlikelybeaccusedofbeingself-serving,opentothe same sort of criticism leveled at the packaging manufacturers who werebehindtheKeepAmericaBeautifulcampaign.We have to engage the support and backing of all stakeholders, including

government.Butwhatbeliefsandresolvedowefindthere?

GovernmentResolveBalancing short-term economic cycles with long-term economic health isundoubtedly a challenge. As we have seen and may even have come tounderstand, there are certain economic levers at the government's disposal tohelpwiththisendeavor.Short-terminterestratesaretheclassicexample.Giventhatourcurrenteconomyishighlydependentonthehealthoftheconsumerandconsumer spending, another economic lever comes in the form of directconsumerstimulusprograms.Duringthelatesteconomicdownturnthatbeganin2008, this leverwas used on twooccasions, firstwith theEconomicStimulusAct of 2008 during the Bush Administration, when families received up to a$600taxrebatetohelpspurconsumerspending.TheotheroccurredinMayof2009 as a result of the American Recovery and Reinvestment Act under theObamaAdministration,where $250 checkswere sent tomore than52millionSocialSecurityrecipients.Whileperhapsnotexplicitlystated,themessagewasclearinbothcases,doyourparttospurtheeconomy—spendthatmoney!

AsNevinAdamspointsout,“Whatarewetellingpeople?PeoplecontinuetofretaboutthefundingstatusofSocialSecurity,butwhenthere'sahere-and-nowinterest inencouragingspending,wedeclareapayroll taxholiday,hoping thatpeoplewill take that 2 percent—money thatwould have gone toward fundingSocialSecurityretirement—andspendit. It'samessage,albeitan impliedone,thatrunscountertotheimportanceofretirementsavings.”Paul Henry of LIMRA agrees, saying that whenever there is a stimulus tax

credit,“It'snever,‘Here's$600,gosaveit.’”Recognizing that the purpose of these programs is indeed to stimulate the

economy,itisnotsurprisingthatthemessageistospendthatmoney.Butwhatismissing—andperplexingwhenyouconsiderourgovernment'sconcernwiththelackofretirementreadinessinthiscountry—isanequalandoppositemessagetosave. Anymessage from government to save for the future is, at best, mutedwhencomparedtothemessagetokeepoureconomyhealthybyspendingmore.Thebalancebetweenthesetwokindsofmessagesneedstochangeifwearetomakeanyrealprogresstowardretirementreadiness.Nevertheless, this tug-of-warextendsfarbeyondsimplemessaging.With the

high U.S. government debt level, all options seem to be on the table in theattempt to close the deficit. In addition to discussions about eliminating itemslike themortgagedeductiononasecondhome,savings limitsfor401(k)plansare also being discussed.Recognizing that the task of balancing the budget isoneofmonumentalsignificance,erodingtheAmericanworker'sabilitytosavefor retirement still seems incredibly shortsighted.Does not long-term thinkingandalong-termsolutiondictatethatwebalancespendingtodaywithsavingfortomorrow? If any changes are to be made, shouldn't they be in favor ofincreasingsavings,notdecreasingthem?Thebottomlineisthatinthelongrunhealthysavingsratesaresynonymouswithahealthyeconomy,becausewithoutthemwewillhavefartoomanypeoplewithoutthemeanstocontributetotheirwell-beingandfartoofewwiththeabilitytosupportthem.Consider, too, thatduringarecentLeggMasonAdvisoryCouncilmeeting,a

think tank set up to contemplate increasing retirement readiness, the topic ofmessaging cameup, specifically aroundwhatminimumpercentageAmericansshouldbetoldtosavetoincreasetheiroddsofbeingretirementready.Severalcouncilmembersfelttherewouldbeoppositionwerethatnumbertobesetmuchhigher than10percent.Whilewe think that thisconcernmaybeunwarranted,thesimplefactthattheconcerncameupspeaksvolumes.Thegoodnewsisthatwhereasanumberof401(k)Whisperersarepresentin

theretirementservicesindustry,theyarealsopresentingovernment.PeoplelikeMark Iwry, who bring a common sense approach to the challenge, instillconfidence thatprogresscanbemadeon the issueof retirement readiness.Hisearlyworkonauto-enrollment is starting tobear fruitandhiscurrentworkonmitigatinglongevityriskislikelytodothesame.AlsofallingintothiscategoryareSenatorsRobPortman(R-OH)andBenCardin(D-MD),whowereintegralto the advances in pension legislation within the Economic Growth and TaxReliefReconciliationActof2001(EGTRRA)andthePensionProtectionActof2006(PPA),andtherearemanyexamplesjustlikethem.Whatweneedaremorepolicymakerswhotrulyappreciatethechallengesweface,whoarecommittedtoretirement readiness, and are willing to boldly cross the political aisle in thenameofbipartisanprogress.Oneofthepointsraisedbyourintervieweeswasthat,livinginademocracy,it

iswe, thepeople,whoareultimatelyresponsiblefor theresolveshownbyourgovernment. After all, good representatives focus on what their constituencycaresabout,andeverytwoyearseverymemberoftheHouseofRepresentativesandonethirdoftheSenatecomeupforreelection.It'sourjobtodemonstratetoour representatives that retirementstability is somethingwedeeplycareabout,andit'stheirjobtorepresentusontopicstheyknowtobeimportanttousandtosocietyoverall.Howtheysupportthisimportanttopicshouldbeincludedinthecriteriaweuseinevaluatingtheirsuitabilityforguidingusintoasecurefuture.What part does their perspective and focus on retirement savings play in ourdecisiontoreelectthem?Ifnotatall,maybethisisaconversationweeachneedtoberesponsibleforputtingbackonthetable.

What,Then,IsOurMessage?Asfaraseachofourresponsibilitiesisconcerned,agoodplacetostartwouldbetoshiftourfocusonwhatweapplaudasasocietysothatit islessofwhatwehaveintermsofmaterialpossessionsandmoreofwhatwe'vedoneinrelationtoensuringlong-termfinancialsecurityandstabilityforourselves,ourlovedones,and our country. Given the right message and messenger—actually the rightstory,whichisthetopicweturntointhenextchapter—thatculturalshiftisnomorechallenging thanoverturning the conceptof the “littlewoman”whowasthoughtbarelystrongenough to lifta roastingpanoutof theoven forSundaylunchbeforeRosietheRiveterburstonthescenein1942.In the same way that contextual factors can be put in place to boost the

wearingofseatbeltsortoreducelittering,itappearsthatweneedtoaddressthecontextualissuesthatdetrimentallyaffectourself-efficacybeliefsandhenceourresolvewithrespecttoretirementreadiness.Perhaps what we have experienced over the past few decades has been the

inevitableconfusion that resulted fromshifting from thedefinedbenefit era tothedefinedcontributionera.Whilenotwishing tousea termasdramaticasalostgeneration(ortwo)withrespecttoretirementsavings,itappearsthatmanypeoplehavegottenlostintheshuffle.Asthepopularityofdefinedbenefitplanshaswanedanddefinedcontributionplanshavetakentheirplace,manyseemtohavemissedthemessagethatweeachneedtotakeownershipofourretirementinmuchthesamewaythatwenowhavetotakeresponsibilityforourcareers.But perhaps thatmessagewas too quietly and timidly expressed in the first

place—somuch so that itwasnearly impossible tohear.That is a charge thatcould be leveled at all the constituents involved in this issue of retirementreadiness.Maybe, too, that iswhere our beliefs—not just around self-efficacybutwhatwearecapableofbearingasanation—arefailingus.For many years psychologists have studied the subtle ways that teachers'

expectations concerning the abilities of their students unwittingly affect thosestudents' outcomes. In the classic Rosenthal-Jacobson study referred to asPygmalion in the Classroom, for example, teachers were deliberately giveninaccurateinformationaboutwhichstudentsbelongedtothetop20percentonaparticulartest;thelistofnamesinfacthadbeendrawnuprandomly.Attheendoftheyearthestudentsweretestedagainandthescoresofthosewhosenameshad been on the fictitious top 20 percent list were found to be significantlyhigher than the rest. This was taken as evidence that, subconsciously orotherwise,“yougetwhatyouexpect,”andthatwhenteachersbelievethatsomestudentsarebrighterthanotherstheytreatthemwith“subtlefavoritism.”Similarly, are our expectations around what the average American can

withstand with respect to hearing a straightforward, honest message aboutretirementreadinesslowerthanourcountrydeserves?We underestimate ourselves all the time. For example, when talk of auto-

enrollmentfirsthitmanyHumanResourcesdepartments,theresponsefromtheretirementservicesandcorporatecommunitieswas,“Youcan'tdothat—peoplewillstormtheHRoffice,upsetthatwetookmoneyoutoftheirpaychecks.”Yetweexperiencedjusttheopposite,withmanypeoplesayingthattheyknewtheyshould have gotten into a retirement plan but the enrollment process and thepaperwork involved, plus deciding where to invest, just seemed so

overwhelming. They were grateful that someone else had taken that off theirplate.ButasFieldingMillerpointedout,“Toooftenemployeessimplywantustotellthemwhattodo.Theyjustaren'twillingtotakeownershipinplanningintheir own retirement. I believe the best retirement programs are created bypaternalistic employers that require their employees to take an increasingresponsibility for planning their own retirement future. I don't like the idea ofkeepingemployeescompletelyinthedark(akaauto-everything),becausesoonerorlatertheywillneedtomakedecisions,andtheywillbepreparedonlyiftheyhave been involved along the way.”While there are many who would preferothers todo things for them, aswasgraphically represented in theBBC'sTheYoungOnes, we have to consider just howmuchwe are prepared to give upwhenwehandoverresponsibilityforourlivestoothers.It is time for the same directness that prompted the president who told his

employees that only stupidpeoplewould fail to join the company's retirementplan—andhedidn'thirestupidpeople.Itistimeforthesamemessagethatthe401(k) Whisperers take pride in conveying to plan sponsors—regardless ofwhetheritiswhattheywanttohear.Andthatsameapproachneedstobedoledoutonanationalbasis.Chad Larsen asked, “What dowe have to lose by putting out a very direct

message?”I'm48yearsold.IwouldbeperfectlyfineifthisDebtCommissioncameouttoday and said, you knowwhat,Chad?You can't retire or receive your fullSocialSecuritybenefitsuntilyou'reage70.Thatwouldn'tbothermeonebitbecausenowIknowtheyareseriousaboutfixingtheproblemanditmaybethereformychildren.Imaybeintheminorityhere,butIthinkthatwhensomething'sbrokenandweknowithastobefixedI'dprefersomeonetotellmewhatmyoptionsare.Atthemoment I'mnot so sure.Themessagesweare sendingoutare sovagueandtherearesomanyvariablesthatit'sdifficultforanyofustogetourarmsaroundwhatwe'retodo.WhatdoIwanttohappen?Justdon'tsurprisemedowntheroad.JusttellmesoI'vegottimetoprepareforit.So, what might a simple, direct, and honest message look like, based on

everything we have learned about how to design an effective public servicecampaign? Inorder todiscoverwhatneeds tobedone toattack the retirementreadinesscrisis,ournextquestionwastolookatthewaysinwhichunpalatable

andunwelcomemessagescanbemadecompellingandsticky.

Chapter9

TellmeaStory

Reasonsdon'tchangebehavior.Whenitcomestoinspiringpeopletoembracesome strange new change in behavior, storytelling isn't just better than theothertools.It'stheonlythingthatworks.

—SteveDenning,TheScienceofStorytelling,Forbes.com,2012Itisperfectlylogicalwhenyouknowthesecret,yetseemsalmostmagicalwhenyoudon't.Apresentershows theaudience12 to15 itemsonascreenwithnoapparent

connectionbetween them.“Whoclaims tohaveapoormemory?”heasks—atwhich almost everyone's hands go up. The presenter selects one guinea pigwhomtheyaregoing to teach—injust15minutes—torecite that listof items,perfectly,intherightorder.The volunteer is taken away and 15 minutes later returns, in front of the

audience. This person stands with their back to the screen, the list visible toeveryonebut them.Thepresenterasks if they're readyand thevolunteernods,butseemskindofnervous.Giventheirpreviouslyadmittedpoormemory,howlikelyisitthattheywillrememberthelistcorrectly?Yetthatisexactlywhattheydo—withoutfumblingorhesitation.Howdidthey

managetorememberallofthosethingsinsoshortatime?Thesecrettothatsuccessliesinwhatthevolunteerwasshownhowtodoin

the time they spent behind the scenes: to create a short story out of a list ofotherwise discrete items.Theywere exposed to one of themost profound butfrequentlyoverlookedwaysinwhichhumanbeingsconnect,communicate,andcompel:storytelling.Tryitforyourself.Theabilitytomemorizethefollowinglistwithinminutesis

somethingthatfewofusareabletodounlesswehaveawaytoconnectthem:

Nowweavethose15wordsintoastory,somethinglikethis:Oneday thekingofSyracusedecided tohaveacrownmade,shaped likeawreath.Hegaveacertainweight ofgold toa localartisan but soonheardrumorsthatthemanhadmixeditwithsilverandpocketedthedifference.Todiscover the truth, the king called upon his cousin, amathematics scholarwho, lowering himself into abath, noticed he displaced avolume ofwater.Thesolutionbecameclear,atwhichpointherushedintothestreetshouting,Eureka!You probably recognize this as the story of how the ancient Greek

mathematiciandiscoveredwhathasbeencalledArchimedes'Principle.Allyouneed todo to remember that listof15words is run through that story inyourmind,visualizingeachkeywordclearlyasyoudoso.

Factsaren'tEverythingAsChipandDanHeathpointoutinMadetoStick:WhySomeIdeasSurviveandOthersDie, “Astory ispowerfulbecause itprovides thecontextmissing fromabstractprose.”Yetbusinessoftenforgetsthat,includingtheretirementservicesindustry.Wehavemistakenlythoughtthatbyprovidingpeoplewithfactualinformation,

theywillhaveeverythingtheyneedtotakeaction.Whenthatdoesnotwork,wethink it is because they have not had enough information—so we give themmore.Infact,theamountofinformationthatisnowavailable—factual,“abstractprose”—becomes so overwhelming that it is not surprising that many peopletuneoutandturnofftheirthinkingaboutretirementreadiness.Whatisthesolutiontoachievingadifferentoutcome?Howabouttellingbetter

stories?Afterall,itisnotasifthereisn'tsufficientevidenceastohowpowerfulthisapproachhasbeenininfluencingheartsandminds.Notjustthat,butstoriescanhelp to transformbeliefsand shapebehavior inways thatwerepreviouslythoughtimpossible.AsrenownedHollywoodscreenwritingcoach,RobertMcKee,pointedoutina

Harvard Business Review article entitled “Storytelling ThatMoves People: AConversation with Screenwriting Coach RobertMcKee”: “If you can harnessimaginationandtheprinciplesofawell-toldstory,thenyougetpeoplerisingtotheirfeetamidthunderousapplauseinsteadofyawningandignoringus.”Thereisnodisputingthefact,givenourcurrentretirementreadinessstatistics,

that the retirement services industry is largely being ignored, despite theproliferationofinformationthatitprovidestotheAmericanpublic.Peoplemaynotbeyawningwhentheyhear thewordretirementbut inall likelihoodmanyareacting likeostrichesandburying theirheads in theproverbial sandhopingtheissuewilleithergoawayorthatsomeoneelsewillcomeinandfixthingsforthem.Aswe have illustrated throughout this book, as a societywe are not asactivelyengagedasweneedtobeinordertoremedytheshortfallbetweenthesavings we have accumulated (if any) andwhat each of us needs in order toretireinatimelyanddignifiedmanner.Butiftheanswertothisimpasseliesinbetterstorytelling,whatexactlydoes

thatmean?Tobetterunderstandthenatureofeffectivenarrativeasameansofachievingadifferentoutcomeonretirementreadiness,weexploredhowothershaveusedstorytelling,pastandpresent,tounpackthenecessaryelementssuchas messenger, message, and medium that would be needed for an effectivecampaign.Webeginwith an historic example of howone vitally importantmessage—

thatwas especially unpopular and largely ignoredby theprimary stakeholders(themedicalprofession)—gainedtractioninnineteenthcenturyEngland.

HowFlorenceNightingaleChangedtheMedicalProfession

Florence Nightingale's (1820–1910) grit and determination were evident longbefore she became the woman completely transformed the way the medicalprofessionthoughtaboutarmymedicalcare,whileattendingtoBritishsoldiersduringtheCrimeanWar.Inanerawhenallmiddle-classfamilies(Florencewasthe daughter of a well-to-do English landowner) wanted was to marry theirdaughtersofftorichhusbands,Florencerejectedavarietyofwealthysuitorsbythetimeshewas25,declaringthatsheintendedtobecomeanurse.Thisfurtherhorrified her parents, as itwas a job that at that timewas considered suitableonlyforworking-classwomen.After completing her studies in Germany, Florence returned to England to

work at a women's hospital in Harley Street, London. After Russia invadedTurkey in 1853 and dramatic stories began to be reported in The Times ofLondonthatcloseto8,000meninthespaceofjustafewweeksweredying,notfromshrapnelwoundsbut fromcholera andmalaria,Florencevolunteeredher

services. Despite the high level of prejudice against women offering medicalassistance of any kind, shewas finally permitted to lead a group of nurses toTurkey.What Florence discovered appalled her. The injured were left in filthy

conditionswithoutadequatewarmthordecentfood.Inthearmyhospitalsatthattimeonlyoneinsixdeathswasattributabletowounds.Itwasdisease—notwar—thatwaskillinglargenumbersofthesesoldiers.Despitehercontinuedappealstotheauthoritiesthatmilitaryhospitalsneeded

tobeoverhauledtobetterdealwiththerealcausesofsoldiers'deaths,Florencewas ridiculed by doctors, her professionalism attacked, and her suggestionsignored by the army top brass. Nevertheless, the British public—through thepress—lovedreadingstoriesaboutherandwhenshereturnedtoEnglandthreeyears later, Florence Nightingale was heralded as a national heroine not leastbecause the death rate, following her principles of care, had dropped from40percenttojust2percent.Florenceleveragedthisnotorietyandbeganacampaigntoreformhospitalcare

more broadly. Her books Notes on Hospitals and Notes on Nursing, bothpublished in 1859, helped to completely transform the medical profession.Nightingale'smessagewasconsistentthroughoutbecauseitwasbasedonaclearvision: to targetmedical care at the real causes of illness—such as unsanitaryconditions—ratherthanwheredoctorssimplyimaginedthemtobe.

LessonsonStorytellingfromNightingaleFlorence Nightingale was not the only person revolutionizing the way armyhospitals tended the sick at that time. Yet it was her story—not others'—thatprompted an outcry andmuch neededmedical reform. TheHeath brothers inMadetoStickrefertotheMotherTeresaeffect,whoisreputedtohavesaid:“IfIlookatthemasses,Iwillneveract.IfIlookattheone,Iwill.”Itwasmuchmore compelling forBritish newspaper readers to hear about a

single,heroicindividualthanafacelessgroupofnurses.FlorenceNightingale'sstory was further enhanced by themoniker given to her byTimes newspaperwriters:The Lady with the Lamp, an image immortalized by the poet HenryWadsworthLongfellowinhispoementitledSantaFilomena.Whenyou lookmore closely at theFlorenceNightingale story, you can see

thatitadherestothesixprinciplesof“stickiness”outlinedinMadetoStick:1.ItisSimple(soldiersaredyingneedlessly).

2.Unexpected (unsanitary conditions are largely responsible for soldiers'deaths,nottheirwounds).3.Concrete(40percentofsoldiersaredyingfromdisease).4. Credible (Nightingale was an internationally trained nurse withimpeccablecredentials).5.Emotional (brave men are dying; a lone woman is tending to them,againstallodds).6.And presents aStory (theLadywith theLamp flitting among soldiers'bedsidesatnight,offeringcomfort).HadtheCryingIndiancampaignbeenconceivedastheCryingIndians(asina

wholetribe)PSA,itwouldlikelynothavehadtheimpactthatitdid.Ashumanbeings we are much more attracted to stories involving a single, compellingcharacter than ones involving a group. This is because, as theHeath brotherspoint out inMade to Stick, one of the most compelling plotlines that humanbeingsrespondtoisthatoftheDavidandGoliathstory.InthecaseofFlorenceNightingale,thisonewoman(David)wentupagainst

the might of the established medical profession (Goliath). She succeeded inchangingbeliefsandthuslong-standingbehaviorswiththehelpofacompellingnarrative that was enhanced by the ease with which people hearing the storycould instantly see a mental picture of the lady with the lamp attending toneedlesslysufferingsoldiers.So,whomightbeourDavidorunderdoginthecaseofaretirementreadiness

story?Interestingly, it was stories about their grandmothers (and sometimes

grandfathers) that many of our interviewees reflected upon in order topersonalizetheconceptofretirementreadiness.Forexample,DallasSalisburytoldus:Mygrandfatherwas in the life insurancebusiness for40years; Iguessyoucouldsayhewasabadriskforhisowncompanybecausehepassedawayat66.My grandmother was 63 when he died, and she lived until she was 93.Essentially,heronlyincomeforthatentiretimewasSocialSecurity.Shehadsoldherhouse,livedinasmallapartmentforthose30years.Shedidn'thavemanyof the thingsshe'dhadduringhermorerobust lifeyears,but shehadherpersonalbelongingsaroundher,hercollectiblesaroundher,herfurniture,herfamily,andherpictures.Shehadfoodonthetable,awarmroofoverher

head,andlotstoreadandtheabilitytobehappy.AndIthinkthat'swhatallofusinacivilizedsocietyshouldstrivetomakesureeveryonecanhave.Soperhapsthemessengeroftheretirementreadinessmessage,spearheadinga

public campaign, needs to be “everyone's” grandmother? Who, then, is theGoliath she needs to go up against? Maybe it's our consumer-oriented,spendaholicsociety!But any messenger needs a compelling message, story that everyone can

understand and empathize with. And few are more compelling than what arecalled origin stories—which is why so many savvy business organizationscapitalizeon them tohumanize themselves, communicatecharacter, aswell asestablishthevaluestheyholddearandinformothersofthewaytheychoosetoconductthemselves.

BusinessandtheCreationMythFor stories to truly resonate, including in today'sworldofbusiness, theymustnotonlybecompellingbutalsohaveagrainoftruth.Consider,forexample,the“foundedinagarage”mythstillheldinawebySiliconValleystart-ups,inspiredbytheoriginsofleadinghigh-techbusinessessuchasHewlett-Packard,Google,andApple.Thesestories seem toespeciallyhithomewithAmericansbecausetheyreinforcethemessagethat“regardlessofhowhumbleyourbeginningsare,you can turn something into an immense success story if you work hard,”according toDartmouthbusinessprofessorPinoAudiawhohas researched the“garage”phenomenon.Crafting a compellingorigin story is sopowerful that somecompanieshave

used it nefariously, such as the story that one of eBay's early employees told(falsely)thatthecompanystartedbecausethecreatorwantedtohelphisfiancéefindmoreof thePezdispensersshecollected.Thatstorysuccessfullycapturedtheinterestofreporterswhootherwisehadignoredthecompany'searlyPR.Oneofthetruthsthatspeaksmostpowerfullyofallforbusinessleaders,who

effectivelyusestoriestocommunicatewithstakeholdersbothinsideandoutsidetheir organizations, involves those beliefs we categorize as values. The morebasic these values are—including love—the more universally appealing theensuingmessageisabletobe.

Uglydoll—ALoveStory

DavidHorvathandSun-MinKimwereforcedbycircumstancesoutsideoftheircontrol to live on opposite sides of the world. After meeting at the ParsonsSchoolofDesignin1996,theyfellinlove.FollowingSun-Min'srequiredreturntoSouthKorea(apparentlyduetoproblemswithherstudentvisa),Davidwouldwrite her letters featuring a hand-drawn character named Wage alongside amessagethatread,“Workinghardtomakeourdreamscometruesowecanbetogetheragainsoon.”ThedreamDavidandSun-Minsharedwasto“tellstoriesthroughbooksandtoys.”Onawhim,Sun-MintookDavid'sdesignandhand-sewedaplushWagedoll,

whichshemailedbacktohimintheUnitedStates.DavidshowedittohiseditorfriendEricNakamuraofGiantRobotmagazinewhoatthattimeownedseveralretailstoressellingdollsandothergoodscraftedbyyoungcreatives.ApparentlyEric thought David was pitching him a product and asked him to supply aquantityofdollstosell inthestore.Thatwasin2001.Sun-Minquicklygottowork,hand-producingtwodozenoftheseplushdolls,includinganotherinventedcharacternamedBabo,whichDaviddeliveredtoGiantRobot.Muchtotheirsurprisethesupplysoldoutwithinaday.Therest,astheysay,is

history.In2006,theircompany,UglydollreceivedtheSpecialtyToyoftheYearaward from theToy IndustryofAmericaandhasgoneon tobecomeahighlysuccessfulinternationalcompanywhosedollshaveinspiredothermerchandizingandanupcominganimated feature film. It hasonlybenefited the company, intermsofsalesandmediacoverage,thattheUglydollwasaproductofthelovebetweenthetwofounders.

CommunicatingValuesThis kind of origin story—how a global businesswas born from love and itsfounders'habitofsendingeachotheraffectionatemessages—ishighlycovetedintheworldofbusiness,forgoodreason.ItwaseasierandmorecompellinginHewlett-Packard—givenourpropensitytoattendandrespondtostorytelling—tospreadthetaleofhowformerCEOBillHewlettusedaboltcutteronthedoortothesupplyroomwithinstructionsthatitshouldneverbelockedagain,inordertocommunicatetheimportanceoftrustwithintheorganization.Thatstorywasalways going to be much more compelling than passing down someincomprehensibleedictfromHumanResources.Similarly,CEOofCiscoSystemsJohnChambers'admissionofhavinggrown

up with a learning disability, including all of the attendant challenges thatpresented, like being mocked by other children and even teachers, gives aninsight into theman, not simply the manager. It also helps to illuminate thevaluesthatheespousesarounddiversityandappreciationforeveryone'stalentsthathebringstotheorganization.Whyarethesekindsofvalues-infusedstoriessocompelling?Because,aswith

theFlorenceNightingaleexample, theyprovideuswith instantly recognizable,truthful characters whom we can all relate to and identify with. And it's thenature of a hero character at the start of their venture that helps to shape theemergingorganizationandkeepitontrack.AswithallthecampaignsdiscussedinChapter6,therewassomethingabout

thesadnessembodiedinIronEyesCodythattheAmericanpublicrecognizedinthemselves; something deeply rooted and connective. The same held true forRosietheRiveter,whostruckachordwithwomenwhofeltthattheyhadmoretooffertheworld.AndChristyTurlington'sownstoryaboutthedevastatinglossofherfathertolungcancerismorelikelytospeaktothosepredisposedtoquitsmokingthanaplethoraofstatistics.Yet, asMikeFigliuolomimics in his bookOnePiece ofPaper:The Simple

ApproachtoPowerful,PersonalLeadership,businessandgovernmentoftenfailto communicate in a way that not only captures our attention but ignites ourhearts.Doyou recognize this, for example,which isFigliuolo's parodyof a typical

organizationalmissionstatement?(Ourmission)istooptimallyleveragethepassionofourpeoplesuchthatatthe end of the daywemaximize employee engagement to get them to thinkoutside the box and synergistically drive value-added activities in a profit-maximizingway that isawin-win forourpeople,ourshareholders,andourcustomers.Ifweareseriousaboutchangingoutcomes—ofimpactingourdeepestbeliefs

aroundretirementreadinessandthedignitywewanttoenjoyinourlateryears—thenweneed tomoveaway fromstatisticsand learn to tellbetter storieswithcompellingcharactersthattouchus.Havingbrieflyoutlined themessenger and themessage, consideringplotline

andrelatablecharacters,ournextquestionwas:Howdowegoaboutsettingthescene in such a way that the typical American worker realizes, “This storyinvolvesme!”

ALessonforRetirementReadinessHowcuriousarethoseofuswhoareinvolvedindesigningretirementplansandmakingmostofthedecisionsonwhatisrightfortheaverageAmerican?Dowereally know the issues well enough to come up with the right solution? Forexample, how commonly known is it that 65-year-old respondents to a PewResearch Center Social & Demographic Trends survey on aging reported in2009theyconsiderage74tobethebeginningofoldage.Orthatthesamestudyfound that the word retirement “means different things to different people”—including,forsome,workingeitherpart-timeorfull-time.Indeed,wemightask:TowhatextentistheaverageAmericanworkerpartof

today'sretirementreadinessconversation?Howcanweexpecttoengagepeopleinastorytheyhaven'tbeenaskedtobepartof?In a recent GapingVoid blog post, cartoonist HughMcLeodwrote: “When

someoneisusingyourproduct,don'taskwhatstoriesaretheytellingaboutyou;askwhatstoriesthey'retellingaboutthemselves,andhowyourproductfitsintoit.You'llgetafarmoreinterestinganswer.”

AStrawManCampaignThestoryofretirementreadiness isnotourstorybutOURstory—theonethatall Americans tell together. And to better understand the stories that averageAmericanworkersare tellingabout themselves,weneed todoabetter jobnotjust of observing but directly askingallstakeholders how they feel about thisissue.Notjustwithrespecttowhattheirkeychallengesare,butwhatideastheyhaveforovercomingthosechallenges.Tothatend,weproposeastrawmancampaigninformedbystoriescollected

fromaverageAmericanswhohaveaperspectiveonthis issue.Afterall,socialmediaandothertechnologiesaremakingiteasierfortheaveragepersontomaketheirvoiceheard.Andpeople todaydesperatelywant their voices tobeheard,nottransmittedbysomefacelessexpertontheirbehalf.Thescene setting thatneeds tobedone foranewretirement readiness story

mustprovideacontextco-createdwiththeverypeoplewholivewiththisissueeveryday.WecandeftlycomeupwithacompellingDavidcharacterandembedhim inaDavidandGoliath tussle;wecangive thatcharacterabackstory (aswiththegarageandUglydollexamples)thateachofuswouldrecognizebecauseitspeakstovaluesweallshare.ButifweaverageAmericansdon't latchonto

thefactthatthisisourstoryinwhichwehaveakeyroletoplay,theproduction—sotospeak—islikelytoshutdownprematurely.That is whywe end this bookwith a letter with your name on it—one (or

more)ofthefourthatyouwillfindinChapter11.Butbeforewecometothat,let'sreviewthechallengefacingusbyaddressingwhatwefeelneedstobedone.When it comes to taking action we're not simply into posing problems andsuggestingsomebroad-brushsolutions.Wehavealreadypickedupthegauntletandstartedrunningwithit.

Chapter10

JointheDance

Unlesssomeonelikeyoucaresawholeawfullot,nothing'sgoingtogetbetter.It'snot.

—TheOnce-lerinTheLoraxbyDr.SeussAfewmonthsagoaftermyyoungsonsand Ihad just completedourmonthlypilgrimage to the barber, the boys and I emerged from the Starbucks justopposite Supercuts.At 10,my youngest has developed a taste for a tall decafmocha,which, likeAmyHaleymentioned in earlier chapters, I indulge on anoccasional basis. What happened next was totally unexpected and quitepowerful. I caught sightof anearlymodelVolvoparked justoppositeourcar.Whatdrewmyattentionwasn't the fact that thiswasoneof theolder, square-shapedmodelsorthefadedpaint,buttheamountofstuffyouwouldn'tnormallyexpectpackedintoacar.Itlookedasifanentireneighborhoodwasabouttogoonacampingtrip,andthiswastheirsolemeansoftransportation.Iwatchedasanelderlywomanexitedthecarandwalkedtothebackholdinga

blanket,which she thenmeticulously folded before placing it inside the trunkandgentlyclosingthelid.WithapitinmystomachIglancedoveratmyboystosee if theyhadnoticed,wonderinghowour conversationmight evolve if theyhad.Myoldestsonhadaperplexedlookonhisface.Aswedroveoff,thecarwasquietforthenextfewblocks.ThenthequestionI

had been dreading came. “Dad, does that lady live in her car?”AJwanted toknow.Whilethequestionwasfullyanticipated,Ididn'thaveananswerorevenknowinwhichdirectiontotakethediscussion,soIasked,“Whydoyouthinkshelivedinhercar?”“BecausetherewasalotofstuffinthereandIsawacat,”hereplied.Wetalkedtherestofthewayhome,butnobodywassatisfiedwiththeoutcome;howcouldwebe?Whilehomelessnessisanissuemostofuscomefacetofacewithoccasionally,

if not regularly, this felt very different, much closer to home. The woman'smannerismsand thewayshe folded thatblanketweresosimilar to thatofmyownmom,who is comfortably retired. I foundmyself wondering, how did it

happenthatsomeonewhohadonceboughtaVolvowasnowreducedtolivingoutofit?If thisbookservestoalertus toour individualandcollectiveresponsibilities

concerningamore financially secure, dignified retirement forpeople like this,thenwewillhaveaccomplishedwhatwesetouttodo.

SomeHonestReflectionWe can start by taking stock of our current reality. While the advent of the401(k) and 403(b) have dramatically broadened retirement savings and arecapable vehicles for carrying us forward, we have not formed the habitsnecessaryfortheaverageAmericantoretireinrelativecomfort.InJuly2012theU.S.SenateCommitteeonHealth,Education,LaborandPensionsreportedthattheretirementincomedeficit—thatis,thedifferencebetweenwhatpeoplehavesavedforretirementandwhattheyshouldhavesaved—is$6.6trillion.Whilecrisis isastrongword that is typically reservedfor things likefloods,

hurricanes, and famines, make no mistake that the state of our retirementreadiness is in crisis! Six point six trillion dollars is a really hard number tograsp,soconsideritthisway:amillionsecondsis12days,abillionsecondsis31years,andatrillionsecondsis31,688years.Multiplythatby6.6andyouseewehavesomeseriouscatchinguptodo.Whereaswecan(anddo)quibbleaboutwhether theseprojectionsaccurately

reflect reality, nobody contests that our retirement readiness is hugelyunderfunded.Weallneedtotakeresponsibilityforwherewearetoday,notjustindustry, policymakers, employers, and theAmericanworker.Whenwe knowthat financial literacy is not generally taught in schools, how can we expectpeople tounderstandthe importanceofsavingfor their future?And that is theresponsibilityofusall.Whenconsumerismisnotjustvaluedinoursocietybutrevered—andsavingisn't—isourcurrentpredicamentsoverysurprising?Let's imaginea futurewhenfinancialeducation isembedded inschoolsona

nationalbasis.Whencourses similar toMathewFrost's personal financegameare being taught in every school in the country, instilling students with theconfidencetoknowthatbasicfinancialacumenisnotjustsomethingthatwecanallacquire,butcanbefunandsatisfyingtoo.By learning skills likebudgeting, saving, and investing, students canchange

theirbeliefsabouttheirabilitytoplanforthefuture.Changingbeliefshelpsto

change behavior so that in the future we help to create a nation of savers,especiallymoreofthoseconfidentSuperSaverswementionedinChapter1.The concepts surrounding retirement planning are more complex than that,

however,andnoamountoffinancialeducationisgoingtomitigatetheproblementirely.Whileunderstandingthatkeyprinciplesofsoundsavingandinvestingarefundamental,wealsohavetodoabetterjobofsimplifyingwhateachpersonneeds to know to achieve a uniquely relevant and successful outcome. Thatmeans simplifying worksite savings plans as well. As all of our intervieweesagreed, a comfortable retirement should not be dependent upon investmentacumenbutshouldbeavailabletoanyonewhoworkshardandsavesdiligentlyforit.

AVisionforWorkplaceSavingsWhat, then, is our vision? It needs to start by acknowledging that voluntaryworksitesavingsprograms,likethe401(k)and403(b),havebecomeAmericans'predominantretirementsavingsvehicles.Assuch,successiscurrentlydefinedinadoptionrates,bothbyemployersandemployees; thissuccessmetricneeds toembracehighersavingsratesaswell.ItiswiththisinmindthatIproposethesimplevisionofa10percentlifetime

savingsrateacrossAmerica.Now, I suspect that a 10 percent lifetime savings rate seems incredibly

audacioustosomeandfartoolittletoothers,butitissimpleandambitiousbytoday's savings standards and would have a profound impact on this nation'sretirementreadinessinarelativelyshortspaceoftime.Rather than fragment the industry by coming up with our own individual

prescription for success, thereby negating the considerable thought and viablesolutions on the table currently, we suggest an approach inspired byimprovisationaltheatre.It'sknownastheyesand...technique.Itistheprinciplethatfirstyouacceptagift(theyes)thenyoubuildonit(theand).Infact,the10percentsavingsratementionedaboveisbynomeansnovel,it isinfacta“yesand...”tootherswhohavemadethisstatementmanytimesbefore.Here'swhatwe mean by “yes and...” as far as the individual concepts of coverage, planperformancemetrics,leakage,andlongevitypreviouslyoutlinedinChapter7areconcerned.

CoverageAsMarkIwryfromtheU.S.Treasurystressedduringourdiscussions,ifpeopleare left to their owndevices outsideof aworkplace savingsplan, a change inretirement readiness is not going to happen. We need to make sure that allworkers have the ability to save through payroll deduction in the workplace.Today,thepercentageofworkerswhoareunabletoparticipateinanemployer-sponsored retirement plan is 40 percent (2010 DOL Population Survey). Weneed to chip away at that figure—and do it today—by engaging allconstituenciesinthisdebate.Let'sbeginbyagreeing(sayingyes)thatourvisionis100percentworkplace

coverage.And?That'sforallthestakeholderstodecide.

PlanPerformanceMetricsInhisbookSaveMoreTomorrow,mentionedinChapter7,UCLAprofessorofBehavioralFinanceShlomoBenartzi prescribed a simple set ofmetrics for aneffectiveretirementplan;90–10–90,whichimplies:

90percentemployeeparticipationinthecompany'sretirementplan.10percentaveragecontributionratebyemployees.90percentofemployeesselecting(ordefaultinvestinginto)asimple,one-stop,professionallymanagedportfolio(suchasatargetdatesolution).Whatifweuniversallyadoptedthesemetricsasabenchmarkforplansuccess?

Couldwegettoour10percentsavingsrates?Again,tothiswesay“Yesand....”

LeakageLegislationwas introduced in the112thCongress tohelp reduce leakage fromthe defined contribution retirement system, known as the SEALAct (SavingsEnhancement byAlleviating Leakage in 401(k) SavingsAct of 2011). Again,protectingalreadyestablished retirementplanbalances fromleakingoutof theretirement system is an important step toward retirement readiness.To thiswesay,“Yesand....”

LongevityTohelpprotectretireesfromtheprospectofoutlivingtheirassets,newretireesshould be exposed to the concept of longevity risk pooling, whether through

investing in a lifetime income benefit such as an annuity, through longevityinsurance, or some other form of guaranteed product. We fully agree thatlongevityisanissuethatneedstobeaddressedandwesupporttheseprotectionswithanemphatic“Yes,and....”

FosteringNewBehaviorsHavingoutlined thebehaviorweare looking tomotivatewhileacknowledgingthe gap between this and our current reality, it is clear that a very differentbehaviorisneededtomoveusclosertoourdesiredoutcome.Thegoodnewsis,thatwhilechangingbeliefsmayprove tobea fresh (butnecessary)challenge,thecontext surroundingaworksite retirementplan is relativelyeasy tocontrolandcanpaybigdividends.Ellen Langer's research, encapsulated in the BBC television program, The

YoungOnes,mentioned inChapter 7, showed that changing the context of anindividual's experience can dramatically change their beliefs and hence theirbehavior.Similarly,byfosteringaretirementplanenvironmentwhereitiseasierforan

individual to save for retirement than not, we envision dramatically changingthat individual's behavior around saving and investing. The retirement planindustryhasalreadybeguntoadoptauto-planfeaturesthatweknowprofoundlychange participant behavior. These auto-solutions transform a powerful forcecalledinertiafromanegativetoapositiveresourcebyturningthedefaultfromnonparticipation to participation, in addition to defaulting other valuablebehaviorsintherightdirection.But in addition to showing us the power of context, The Young Ones also

cautioned us about its temporary nature. Remember that when helpers wereprovided to thecelebrities, theystarted to revertback to theiroldways.Whencontextchanged,sodidbehavior.Withthemediantenureofanemployeebeingjustshyoffiveyears,anemployee'scontextwillchangerepeatedlythroughouttheirworking lifetime.Thismeans thatany lastingbehavioralchangeneeds tobegroundednotonlyincontext,butinbeliefs;andchangingbeliefsisn'teasy.Somewouldsayyousimplycannotchangepeople'sbeliefsaboutsavingina

meaningfulenoughwaytohaveamaterial impactonretirementreadiness.Butreally,howhardhavewetriedtochangeourbeliefs?Haveyouseenthataward-winningPSAaboutsavingforretirement?Neitherhavewe.Whynot?Becauseitdoesn'tyetexist.Wemanagedtodecreaseforestfirestosecuretheenvironment;

todecreasesmokingtoreducelungcancerandothercigarette-induceddiseases;to decrease litter to ameliorate pollution; and we got people to buckle up,reducing vehicular deaths. These were all things critics said beforehand werevirtually impossible to do. Yet we achieved them. How? With simple yetcompellingmessageslikeRosietheRiveterandSmokeyBear.Wetoldstories,didn'twe?Andmore than that,we got them to stick, similar to themeans ofremembering Florence Nightingale as the Lady with the Lamp or HewlettPackardas“MadeinaGarage.”Yes,wehavetochangethecontextwithinthevoluntaryretirementplan.And,

wehavetotellAmericansastorythatiscarefullydesignedtostick.

UppingOurResolveAs we mentioned in the State of the Union chapter, when John F. Kennedyfinished layingout his four-part plan for space exploration, he said somethingveryimportant,whichiswhywe'rerepeatingithere:LetitbeclearthatIamaskingtheCongressandthecountrytoacceptafirmcommitmenttoanewcourseofaction,acoursewhichwilllastformanyyearsandcarryveryheavycosts:$531millioninfiscal'62—anestimated$7to$9billionadditionalover thenext fiveyears. Ifweare togoonlyhalfway,orreduceoursights in the faceofdifficulty, inmy judgment itwouldbebetternottogoatall.President Kennedy had the foresight to immunize Congress and our nation

against the potential for the lowered resolve that he knew might prevent hisvision taking shape.Hadhe not done so,NASA,whichwas devoted to spaceexplorationandtheCommandCenterthatbroughtApollo13backtoEarth,mayverywellhavefracturedandfailedinitsmissiontosendamannedspacecrafttotheMoonandbringitsafelyback.Similarly, ifweare to succeedwith retirement readiness,wewillneed tobe

crystalclearinourdirection(ourvision)andsteadfastinourresolveduringthemanytestsandsetbacksyettocome.Weneedtoimmunizeourselvesagainstthedoubtersandtheskepticswhoareoutthere.How?Bybringingthemtothetableandsaying,“Helpusdetermineasolution—orshut theheckup!” In thiscase,resolve is about more than just weathering doubt and silencing skeptics; it'sabout leveraging thatdoubtandskepticismsowecancraft anevenbetterandpersistentvision—andinnovatearoundthat.

Weknow that by changing the context of a retirementplan,we can foster abettersavingsenvironmentforworkersthroughsupportingpowerfulretirementplan drivers that promote higher levels of saving. But we also know that notenough of these behavioral drivers are being included in retirement plans andthatevenwhentheyare,theyarebeingtootimidlyemployed,asisthecasewithauto-enrollmentatadefaultcontributionrateof3percent.Wealsoknowthatinorder to fullyutilize thesedrivers,wewill need to see a shift in focus for theentire industry: plan sponsors, financial advisors, and policy makers. Thesekinds of changeswill demand a strong resolve from all stakeholders, becausetheyoftenrequiremoreeffortandcanevendriveupplancosts.Speaking of tough conversations, the financial services industry needs to be

willing to have thesewith their clients, engaging employers about their plan'seffectiveness in trulypromoting retirement readiness.Employers, in turn,mustbelievethatitistheirresponsibilitytoencourageworkerstosaveforretirementandbewillingtomakeboldchangestotheirretirementplans.Andpolicymakersmustsupportthesedriversforretirementplansuccessbymakingthemeasiertoadopt.Again, we don't mean to insinuate that everything that has already been

suggestedorimplementedneedstobescrapped.Onthecontrary,inthespiritof“Yes,and...”we'reaskingforabroader,morecohesivenationalconversation.AsUniversityofCalifornia,DavisprofessorAndrewHargadonoutlinesinhis

bookHowBreakthroughsHappen:TheSurprisingTruthAboutHowCompaniesInnovate: “The notion of the lone genius laboring away in the basementlaboratory to invent a future is, by now, one we should all be safely free of.Innovativefirmssucceednotbybreakingfreefromtheconstraintsof thepast,but instead by harnessing the past in powerful new ways. The result is aninnovation process that thrives bymaking smaller bets, by building the futurefromwhat'salreadyathand.”Inshort,whileweneedtolookforcreativeinputbothwithinourindustryas

wellasoutsideofit,weneedtorecognizetheprogresswe'vemadeandresistthetemptationsomefeeltothrowthebabyoutwiththebathwater.Further,weneedtorecognizethatouranswerswilllikelycomefromaconceptHargadonreferstoas“RecombinantInnovation,”whichsimplystatedinvolvestherecombiningofoldideas,ratherthaninventingcompletelynewones.Sowhatarewegoingtodoaboutit?Thereisnothingworsethanthepersonwhospeculatesandcomplainsaboutall

that is wrong, postulates a few solutions, and then sits on their hands doing

nothing.It'stimetoseriouslygettowork.Weknowthatcontextdrivesbehaviorand behavior can drive beliefs, but what catalyst do we need to begintransformingourculturefromanationofspenderstoanationofSuperSavers?How do we transform beliefs so that our industry begins to reestablish the

contextofworksiteplansinawaythattrulypromotessaving?How do we convince employers to take on that new level of

paternalism/maternalismrequiredtoembracetheboldnewplandesign?And how do we create the motivation needed for the American worker to

simplysavemore?Whileweknowinertiaplaysasignificantrole,unlessoursocietypossessesa

strongbelief thatsavingfor retirement is important,distractionswillderail thebestofintentionsoverthelongterm.AbroadermovementisneededtocapturetheheartsandmindsofAmericans,

andanewidealismneedstotakeroottocreatethesamehabitsaroundsavingashave been created around brushing our teeth. The ingenuity that has beendemonstrated around the 60-year history of public service movements inAmerica, that addressed such important topics as littering, smoking, and thewearingofseatbelts,needstobeappliedtooneofthemostimportantcrisesofthetwenty-firstcentury:retirementreadiness.What,then,dowesuggestasajumpingoffpoint?Our proposal is for the financial services industry to form a coalition with

policymakers, similar to what happened to drive the Keep America Beautifulcampaign, with the single mission of ensuring every American has theopportunity to save and retirewith dignity.This coalitionwill need to be 100percentbrandagnosticwithrespecttotheproductsandservicesofitsunderlyingmembersandcoalescearoundtheneedtosaveaboveallelse.Simple concepts, such as saving10percent of your pay annually,which are

easytorememberandsimpletoexplain,needtobescriptedandrepeatedwiththekindoffrequencythatproducesstickiness.Byleveragingtraditional,social,anddigitalmedia in newand refreshingways,we canbegin to plant the seedneeded to change our national beliefs around saving for retirement andretirementreadiness.SocialmediaenginessuchasFacebook,Twitter,LinkedIn,YouTube, Pinterest, and the like can be harnessed to propagate these themes,similartothewaythattheyhavehelpedtoimpactrecentworldevents.Tocontinue theconversation startedwithin thisbook,wehaveestablisheda

website at www.SavingAmerica.org. Designed to put beliefs into action, this

brandagnosticsiteisintendedtoserveasahubforhelpingtogatherideasandspread the word about effective workplace retirement savings programs inAmerica.Visitwww.SavingAmerica.orgtodaytolearnhowyoucanbecomeachampion

ofthenationalmovementtobuildamoresecureretirement.

TheDancingManIrecentlyattendedaleadershipprogramatDukeUniversitywhereoneconceptstood out: the fact that our society celebrates The Dancing Man. This is theinnovator, the personwho steps outside the box to be the catalyst for change.Our society recognizes this person as very important—perhaps the mostimportant; in fact,we often assign to them an almost heroic persona.But oneindividual does not make a movement, and so this is somewhat of a naïveinterpretation.Moreoften thannot, it is thefirstperson to join thedance—thefirstfollower—whobeginstotipamovement,becauseonepersondancingaloneisjustalonenut!LookonYouTube forDerekSivers' remarkable short video,First Follower:

LeadershipLessonsfromtheDancingGuyandwatchwhathappensasthelonedancingnutbecomestheinspirationforanentiremovement.You'llnoticehowthemomentumreallypicksupsteamasthethirdandfourthdancersjoininandeverythingtips.Weknowweareinthethroesofaretirementreadinesscrisisandthechallenge

is of epic proportions.On January 1, 2011, the oldest peoplewithin theBabyBoomergenerationbeganturning65yearsofage.Tenthousandmorewilljointhem,everyday,forthenext19years,asreportedbythePewResearchCenter.Anestimated thirdofAmericansaged62orolder say that theyhave“alreadydelayedretirementbecauseoftherecession.”Yetdespite thegrayingof the laborforce,weneedtoreassureourselves that

the story has not yet played out—it's not over quite yet because the completestoryhasnotyetbeenwritten.Itisultimatelytheresponsibilityofeachoneofustohelpgettheendingright.But,inorderforustomaketrueandlastingchange,wearegoingtohavetocreateasociety-widemovement.Sowhatareweaskingyoutodo?Simplythis:jointhedance.Andifyouare

still not sure how, just turn the page because in the final chapter of this bookthereisaletterfrommewithyournameonit.

Chapter11

LetterstoStakeholders

Thischapteroffersa letter toeachof thefourmaingroupswebelieveneed tohelpenactthechangetoamoreretirementreadyAmerica.Pleasereadthemallandthengobackto the letter thatspeaksdirectly toyou.Beyondthat,makeaconsciousdecisiontohaveavoiceinthisvital,nationalconversation.As Andy Warhol pointed out in Andy Warhol in His Own Words: “When

peoplearereadyto, theychange.Theyneverdoitbefore then,andsometimestheydiebeforetheygetaroundtoit.Youcan'tmakethemchangeiftheydon'twantto,justlikewhentheydowantto,youcan'tstopthem.”Whichofthosepeopleareyou?

LettertoallAmericansDearfellowAmericans,WhentheNationalFoundationforCreditCounseling(NFCC)recentlypolled

Americans just likeyouabout theirgreatest financial regrets,guesswhatwerethetopthreeresponses?

1.Habituallyoverspending.2.Inadequatelysaving.3.Notsavingenoughforretirement.Chances are that you relate to one or all of these issues, so let's try a brief

thoughtexperiment.Imagineyoucouldgobackintime20,30,maybeeven40years,tothepointat

which you have just begun to work. Given what you feel now about theinadequacy of your retirement savings—or even your financial security ingeneral—what would you do differently? Would you be inclined to questionyour need for all that stuff youhabitually bought over theyears?To set asidewhatever you could—but at least 10 percent—of your earnings? To takeadvantage ofwhatever retirement plan your employer offered, and then roll it

overtothenextplanwhenyoumovedontoadifferentjob?Ofcourse,withhindsight, very fewofuswould refuse todo someor all of

those things.Unfortunately,wedon't have the luxuryofgoingback to changewhatwedidinthepast.Whatwedohave,however,istheabilitytochangethefuture.Here'show.Forget your own situation for amoment.Can you imagine howmuchmore

inclinedyouwouldhavebeen tosavefor thefuture ifsomeoneyouknewandadmiredhadtakenyouasideandtoldyouhowtheynowregrettednotstartingtosavesooner?What if your future self had explained the consequences of living each day,

knowing that there isvery little timeandenergy left to secure thatdreamyoualways had? Including retiring when you choose to, rather than having tocontinueworkingbecauseotherwiseyoujustdon'thaveenoughtoliveon?Why not be that future self to a young person in your life—starting today?

And,yes,we'reawarethatyoungfolksarenotalwaysthemostreceptivetowiseadvice,somaybeyoushouldstartevensoonerthanyouwouldthink.YoumightbeginbydownloadingMoneyAsYouGrow:20ThingsKidsNeed

ToKnowToLiveFinanciallySmartLives,thedocumentwementioninChapter5 on financial literacy, available at www.moneyasyougrow.org/ and takeinspirationfromthemilestonesoutlinedinthatbooklet.Whyaren'tyouthepersonwhohelpsteachourveryyoungestcitizensthatthey

mayhavetowaitbeforebuyingwhattheywant?Orwhosharesthewondersofcompound interest with a pre-teen? Or who uses the challenges of fundingcollege as a way to bring a teenager into important financial discussions? Orwhomakes theirgraduationgift toanewentrant intoourworkforcea sumofmoneywithwhichtoopenasavingsaccountorsomeformofIRA?RememberAmyHaleyfromChapter1andhowshewasstronglyinfluenced

byhergrandfatherwithrespecttothewayheinvestedandmanagedhismoney—totheextent thathehadlefthiswidowcomfortablyoff?Wouldn'tyouwantany young person you care about to have the kind of freedom and options ofsomeonelikethat,whohabituallyputsawaybetween10and20percentofherincomeanddoesn'tfeellikeshe'smissingout?Onthecontrary,thinkaboutwhatyourlifewouldbelikenow,withallthedreamsyoucouldbringintoreality,ifyouhadstartedsavingrightfromtheget-go.Youknowoneofthecoolestthingsaboutpayingitforwardinthisway?Weall

knowthatactionsspeak louder thanwords, right?Thenitwon'tbeenoughfor

you to embrace the typical “do as I say, not as I do”mantel of parenting.Byresearchingtheissueoffinancialliteracyinordertoofferayoungpersonwisecounsel,youcouldendupfindingthatyouhavechangedyourownbeliefsandbehaviors and can look forward to a more secure retirement than wouldotherwisehavebeenthecase.There are many things we don't—or won't—do for ourselves. But when it

comestoourchildren,orthoseyoungpeoplewecareaboutthemost,wewouldwalk over coals tomake their lives the best they can be, wouldn't we? Thenconsider this: think about what you most regret and be darned sure that youwon'tallowthoseinyourcareandlovinginfluencetoexperiencethesamewhentheyreachyourage.Startthemsaving—today!

LettertoPlanSponsorsDearPlanSponsor/Employer,Ihavehadthepleasureofworkingdirectlyfor(andwith)youforthepast35

years. Iknowyou tobe inherentlygoodpeoplewhocareabout thesuccessofyourbusinesses,theproductsandservicesyoudeliver,andyes,youcareaboutthe employees who serve your organizations. You likely spend as much timewithyouremployeesasyoudoyourownfamilies.Youbecomevestedintheirlivesandtheirsuccess,bothpresentandfuture.Oneoftheverybestwaysyoucan help positively to influence their future success is to get them to save forretirement.Imagineforamomentyouare20yearsinthefutureandthatyouareretired.

Youtookretirementplanningseriouslyfromaveryearlyageandhavereachedfinancialcriticalmass, thepointatwhichyoursavingswillclearlyoutlastyouandyourfamily.Congratulations!Youhaveclearlymadesomegooddecisionsandrepresentasmallminorityofoursociety.Lifeisgoodforyou.Let'sfurtherimaginethatit'saspecialoccasionandyou'veinvitedafewclose

friendstojoinyoufordinneratyourfavoriterestaurant,whichisinaroughpartoftown.Youhavejustparkedthecar—yourspouseandfriendshavingalreadymadetheirwayintotherestaurantsoasnottogetwet—whenyouspinaroundandaccidentallybumpintoahomelessmanwhoishunchedoverandsoakedtothebone.Althoughthereissomethingstrangelyfamiliarabouthim,yourushforthewarmthoftherestaurant.Asthemaîtred'seatsyou,yourmemorycomesrushingback.Yourealizethe

manwasBill,whoworkedforyoufor10years.Hewaskind,loyal,andaveryhardworker.Yousit there insilencewonderinghowsomething like thiscouldpossibly happen. The sad truth is that theremay beBills in every one of ourcompanies.Okay,soI'mchannelingmyinnerDickensheretolaborthepoint.Butletme

ask you this: how many of our current employees could end up like Bill?Unfortunately,if thecurrentstatisticsareanythingtogoby,thismaynotbeasunusual as one might hope. Remember the woman who was told by PaulD'Aiutolothatshehadtocontinueworkingbecauseshehadnosavingstoretireon?SheisjustoneofmillionsofAmericans—tensofmillions—whohavenexttonothingsetaside,notjustfortheirretirementbutforanythingatall.Infact,arecentstudy indicated thathalfofAmericanshave threemonths' salaryor lesssockedawayforanemergency,andaquarterhavenorainydaymoneytorelyonatall.Andthenewsisn'tmuchbetterwiththeyoungergeneration(18–29-year-olds),63percentofwhomsaid theyhad threemonths' salary tocover thematbest,shouldtheylosetheirjobs.So,what'sthisgottodowithyou?Well,aswe'vestressedthroughoutthisbook,theworkplaceistheonearenain

which we know we can encourage the average American to save. So, as anemployer you represent America's best hope for helping your fellow citizensenjoy a dignified, secure retirement. But that means you need to adopt aretirementplan,preferablywithauto-enrollment,andhaveastrategyinplace—worked out with a skilled advisor—to help maximize every employee'sretirementreadiness.We've talked a lot already about the importance of establishing the right

context as a driver of behavioral change. With the Keep America Beautifulcampaign,forexample,thepresenceandproximityofgarbagecanswasoneofthebiggestinfluencersthatchangedlitteringbehavior.Thisgreatcountryofoursisrelyingonyou,then,toputinplacetheequivalentcontextforyourretirementplaninordertoboostretirementsavingsbehaviorinyourcompany.Now,let'saddresstheelephantintheroomdirectly.Iimaginemanyofyouare

readingthisandthinkingthatweliveinalandoffreechoice.Somepeoplemakebad choices and we can't force them to save. You're not a parent to youremployees;youaretheiremployer.Thetroubleis,millionsofAmericanworkersnever got the memo and they are confused by the shift from defined benefitplans to defined contribution plans. Most have never been educated tounderstand basic financial issues—as we articulated in Chapter 5—and have

neverbeentaughttomakesoundfinancialdecisions.We'vealreadyofferedyouabookfullofgoodreasonstohelpthepeopleyou

employmaximize their retirement readiness.We've laid out the importance ofincreasing participation in this country to 90 percent; stressed the need fordouble-digit deferral rates; and outlined the value of 90 percent of employeesinvesting their assets in simple, targetdate solutions thatpromoteproper assetallocation.Butlet'sbringtheargumentbacktothebasic,fundamentalhumanissuewe're

reallytalkingabouthere.WhenitcomestohavingaretirementsavingsplanthatwillchangethedestinyformillionsofBillsandMarysinourcountryweonlyhavethistosay:it'stherightthingtodo!So,whatwillyoudo,anddotoday,tohelpAmericachangeitssavingshabit?

LettertoPolicymakersDearPolicymaker,ThoseofuswhohavehadthehonorandprivilegeofvisitingWashington,DC

toconversewiththosepartiesdirectlyinvolvedwithretirementissuescannotfailtobehumbledbythepassionmanyofyouexude.Thereisnodoubtinmymindthat thosewho seekandattainhighpoliticalofficebelievewithevery fiberoftheirbeingthattheyaredoingwhatisrightforthisgreatcountryofours.Andwhen it comes to the issue of retirement we need only look to the bipartisanefforts on this important issue, led by Senators Portman and Cardin, forinspiration.As the editors ofPLANSPONSOR magazine, bemoaning the lack of earlier

politicalinterestinpensionlegislation,letalonetheskillsorcloutnecessarytoeffectpolicy,wroteinApril2003:Twoverydifferentcongressmenchangedallthat,andtheirhandistobeseeninvirtuallyeverypieceofpensionlegislationthispastdecade.RobPortman,aRepublican fromOhio,andBenCardin,aMarylandDemocrat,neitherofnotably centrist leanings, nonetheless found common cause in tackling theincreasinglyprecariousstateofworkplaceretirement.Workinghandinhand,theymanaged to forge something of a consensus in aCongress that resistsencroachment from the right (savings should be an individual, not aworkplace,priority)andleft(savingsshouldbemandated)—andinthemiddleofoneofthemorefractiousperiodsinAmericanpolitics.Insteadoftheusual

compromised mish-mash, their cooperation has produced what virtually allconcernedrecognizeasintelligentandproactivepensionsreform.Nevertheless, in concluding that article, the PLANSPONSOR editors added

thatwhileforeignpolicyshouldbeabovepolitics,“(p)ensionpolicywillneverhavethatluxury...”Butitcananditmust—withyourhelp!Please—be pro-retirement savings, which on the face of it sounds like an

unnecessary,evenodd thing tosay.But thefact is, there isamisconception inthiscountrythatwearenotjustaspendingculture,butourgovernmentneedsustobeaspendingculture,otherwisetheeconomywillcollapse.And,sadly, thatmisconceptionpersistsdespitethefactthatweknowthatourcitizensneedtobesavingmore—notjustforthesakeofthemselvesandtheirfamilies—butinordertoestablishandmaintainabuoyanteconomyoverthelonghaul.Whichsegues into therealmessageof this letter.Yes,Icouldstresshowwe

needyourhelpwith issues likecoverage.Wereallycoulddowithsimplifyingmany of the rules around auto-enrollment. And greater legislative focus onfinancialliteracyis,asweillustratedinChapter5,notonlyhugelyimportantbutperhapsneedstotakeamoreupbeatandaggressivestancethanpreviously.Butyou've read the book and presumably know that all of these things arewithinyourpurview.The real point is how vital it is to take the long view with the issue of

retirement readiness. We need a compelling vision that takes into accountcontextand beliefs, inorder to ensure thatworkingAmericans can retirewithdignity, with sufficient savings, and the option to give up work when theychoose.Nota four-yearorevenaneight-yearvision...butone that spansmanygenerationstocome!How?Well, Washington already has the context and beliefs in place to do

exactly that. I stumbled upon the U.S. Office of Personnel Management'swebsite that has been set up for “recruiting, retaining, and honoring a world-classworkforcetoservetheAmericanpeople.”Someofthecompetencieslisted“tobuildafederalcorporateculturethatdrivesforresults,servescustomers,andbuildssuccessfulteamsandcoalitions...”are:

Creativityandinnovation.Flexibility.Vision. Leveraging diversity (including, presumably, diverse opinions on how

problemscanbesolved).Customerservice. Entrepreneurship (including taking “calculated risks at accomplishingorganizationalobjectives”).Partneringtobuildcoalitions.

Thosearefinegoalsaroundacompellingvision.Let'sapplythemtotheissueof retirement readiness—today! Inwhich case, there are only two questions Ihavelefttoaskyou:

1.WhatcanyoudoaroundtheissueofretirementreadinessforyourfellowAmericansthatembracesthecompetencieslistedabove?2. What gestures and actions will you make that involve less of the fistraising we've seen in politics lately, andmore about extending our handsacrossthecurrentpartisandivide?Washingtonexpectsexemplarybehaviorfromitsworkforceandweexpectno

lessfromourelectedofficials.

LettertotheRetirementIndustryDearfellowRetirementServicesIndustryProfessional,SomeyearsagoIworkedasafinancialadvisorforDeanWitterReynolds in

theSanFranciscoBayArea,whereIbuiltmyclientbasebyofferingeducationalseminars on financial planning in the workplace.My offer, post-presentation,wasanofee,noobligationfinancialassessmentforanyonewhowantedmetodigdeeperintotheirfinancialsituation;somewentontobecomeclients.Onemorning,afterjustsuchaneventatahigh-techcompany,Imetwithtwo

sets of employees.The firstwas anolder gentlemanwho toldme that hewaslookingforwardtoretiringsoonbecausehehadanumberoflifelongdreamsstilltoaccomplish.Tentatively,helaidhisfinancialstatementsonthetablebetweenus.Whilehewasn'trichbyanymeans,itwasimmediatelyapparentthathewasa saver.His housewas paid off, he had no debt, and therewas a tidy sumofmoneysetaside.Itwasquiteclearthathisintentiontoretirecouldbemet,prettymuchwheneverhechose;wepartedcompanywithbothofusfeelinggoodaboutthatoutcome.Not surprisingly, I was optimistic whenmy second appointment of the day

knockedonthedoor.Incameacouple,aroundthesameage,whoalsowantedtoretire,butforquitedifferentreasons.Neitherof themwasinthebestofhealth

and they toldme theywere justplainworndownbya lifetimeofwork.TheirplanwastomovetoaplaceinNevadatoenjoythedrierclimateandlowercostofliving.LookingattheirpaperworkIcouldseethatthiswasn'tgoingtohappenany time soon. They had $50,000 in savings between them but considerablecredit carddebt and a timeshare thatwasprovingdifficult tooffload.Aquickcalculationputtheirnetworthclosetozero.Buthere'sthereallystunningfact—theyweredumbfoundedwhenIdelivered themessage,completelyunawareoftheirpredicament.Tellme,howdoesthathappen?Inthefaceoframpantconsumerismandfree-

flowingrevolvingdebt,asPaulD'Aiutolosoeloquentlystated,“Wejusthavetodo better.We have to do better as an industry to not have people be in thatposition.”Nevermindtheindustryasawhole—whataboutyou?Whatareyoudoingto

ensure that the people you serve never find themselves in that position? YouwanttoknowhowthepeoplewhoCharlieRuffelcalls401(k)Whisperersdoit?Inshort,theydon'tbackdown.What do Imean by that?Well, here's the thing.Howmany times have you

askedaplansponsor if they'veconsideredauto-enrollment—one thing thatweknowdrivesparticipationinworkplaceretirementplans?Andhowmanytimeshaveyouheardfromthemthatit'stooexpensiveandsothey'renotgoingtodothatrightnow?That's the moment of truth. What do you do then? Do you say, “Okay, I

understand that, let's lookat otheroptions,”ordoyou standyourground?Doyou point out to them thatwe all have to do something about this retirementreadiness crisis in the United States by ensuring maximum participation inworkplace plans —otherwise people will have nothing saved for when theyretire?Doyouchallengetheirresponsibilitytotheiremployees,orjustlooktheotherwayandcarryonasifit'snotyour—ortheir—ultimateresponsibility?Ifbeinginthisbusinessforover20yearshastaughtmeanything,it'sthatwe

each have the ability to profoundly shape the behavior of plan sponsors. Justlook at wherewe have done that already: plan investment fund selection andfiduciaryriskmitigationbeingjusttwoexamples.Wenotonlybuiltthesolutions—the tool sets, processes, and standards—wecreated thedemand for thembydoggedly emphasizing fiduciary liability and the need for investment duediligence.Now,I'mnotsuggestingthatthesethingsaren'timportant;ofcoursetheyare.

But,havingreadthisbookwouldn'tyouagreethat,inthegreatschemeofthings,

they are certainly not themost important thingswe could be stressing to plansponsors?How the one thing thatwill help change outcomeswould be to getmorepeopleintoaworkplaceretirementsavingsplaninthefirstplace?It'stimethatweasanindustryfocusourinnovativeenergyaroundthethingsthatmattermost: get everyone to participate, drive up deferral rates, and direct them tofundamentallysoundinvestmentchoices.Thesearethethingsthatwillmovetheneedle.So, I ask you again: What are you prepared to do about that? When the

momentoftruthcomesandaplansponsorkicksbackagainstdesigningaplanformaximumparticipationwiththe“tooexpensive”argument—whatdoyoudothen?Challengeorconform?As the formerChairman andCEOof IBMThomas J.Watsononce said, “If

youstandupandbecounted,fromtimetotimeyoumaygetyourselfknockeddown.Butrememberthis:Amanflattenedbyanopponentcangetupagain.Amanflattenedbyconformitystaysdownforgood.”Forthesakenotjustofyourownabilitytosleepatnight,butforthegoodof

our industry long termand thesakeof thiscountryand itscitizens,wecannotstaydownformuchlongeronthisissue.A401(k)Whisperer.That'saprettycooltermforthosemenandwomenwho

aremakingarealdifferenceinpeople'slives.So—here are two questions directed specifically to you: Will you join us?

Thenhowwillyouproveyoudeserveto?

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Glossary401(k) plan: An employer-sponsored defined contribution plan that enablesemployees to make tax-deferred contributions from their salaries to the plan.Companiessponsoring theseplansoftenalsomakecontributions,matching theemployee'scontributionsuptoacertainpercentage.403(b)plan:Anemployer-sponsoreddefined contribution retirementplan thatenablesemployeesofuniversities,publicschools,andnonprofitorganizationstomaketax-deferredcontributionsfromtheirsalariestotheplan.aggressive:An investmentapproach thatacceptsabove-average riskof loss inreturn for potentially above-average investment returns. Contrast toconservative.American Society of Pension Professionals & Actuaries (ASPPA): Anonprofit professional organization of 10,000 plus members which works toeducate retirement plan and benefits professionals, while preserving andenhancingtheprivatepensionsystem.annuity: Form of contract sold by life insurance companies that guarantees afixed or variable payment to the annuitant at some future time, usuallyretirement.Allcapitalintheannuitygrowstax-deferred.assetallocation:Amethodof investingbywhich investors includea rangeofdifferent investment classes—such as stocks, bonds, and cash equivalents—intheirportfolios.Seediversification.assets:Securities,cash,andreceivablesownedbyaperson,business,retirementplan,oraninvestmentfund.automatic escalation: A provision in a defined contribution retirement planwhereby an employer automatically increases the percentage of salary that anemployeedefersintotheretirementplanatasetinterval,uptoapredeterminedmaximumpercentage.Mostoftenusedinplanswithautomaticenrollment.automatic enrollment: A provision in a defined contribution retirement planthat allows an employer to automatically enroll employees in theplan at a setdeferral rate unless the employee chooses to opt out of the planor enroll at adifferentdeferralrate.BabyBoomers:Thegenerationbornbetween1946and1964.Bear Market: A period during which the majority of securities prices in a

particularmarket (such as the stockmarket) drop substantially.One generallyacceptedmeasure isapricedeclineof20percentormoreoverat leasta two-monthperiod.ContrasttoBullMarket.bond:Adebtsecurityissuedbyacompany,municipality,orgovernmentagency.Abondinvestorlendsmoneytotheissuerand,inexchange,theissuerpromisestorepaytheloanamountonaspecifiedmaturitydate;theissuerusuallypaysthebondholderperiodicinterestpaymentsoverthelifeoftheloan.broker-dealer: A company engaged in the business of buying and sellingsecuritiesandotherfinancialinstrumentsforothersorfortheirfirm.budgetdeficit:Excessofspendingoverincomeforagovernment,corporation,or individual over a particular period of time. In reference to the federalgovernment,abudgetdeficitisalsoknownasthenationaldebt.Bull Market: A period during which a majority of securities prices in aparticularmarket(suchasthestockmarket)risesubstantially.ContrasttoBearMarket.collectiveinvestmenttrusts/fund:Afundthatisoperatedbyatrustcompanyorabankandcombinestheassetsofvariousindividualsandorganizationstocreatealarger,well-diversifiedportfolio.compounding:Thecumulativeeffect that reinvestingan investment'searningscanhavebygeneratingadditionalearningsofitsown.Overtime,compoundingcanproducesignificantgrowthinthevalueofaninvestment.conservative:An investmentapproach thataims togrowcapitalover the longterm,focusingonminimizingrisk.Contrasttoaggressive.coverage:Theproportionofworkerswhohaveaccesstoaworkplaceretirementplan(includesboththosewhoparticipateintheplanandthosewhodon't).default:Afailurebyanissuerto:

1.Payprincipalorinterestwhendue.2.Meetnonpaymentobligations,suchasreportingrequirements.3.Complywithcertaincovenantsinthedocumentauthorizingtheissuanceofabond(anindenture).

deferralrate:Theproportionofanemployee'spretaxcompensationthatissetasideasacontributiontoaretirementplan.defined benefit (DB) plan: An employer-sponsored pension plan where theamount of future benefits an employee will receive from the plan is defined,typicallybyaformulabasedonsalaryhistoryandyearsofservice.Contrasttodefinedcontributionplan.

definedcontribution(DC)plan:Anemployer-sponsoredretirementplan,suchasa401(k)planora403(b)plan,inwhichcontributionsaremadetoindividualparticipant accounts.Dependingon the typeofDCplan, contributionsmaybemade by the employee, the employer, or both. The employee's benefits atretirement or termination of employment are based on the employee andemployercontributionsandearningsandlossesonthosecontributions.Seealso401(k)or403(b)plan.Contrasttodefinedbenefitplan.diversification:Thepracticeof investingbroadlyacrossanumberofdifferentsecurities, industries, or asset classes to reduce risk. Diversification is a keybenefitof investing inmutual fundsandother investmentcompanies thathavediversifiedportfolios.Employee Benefit Research Institute (EBRI): A nonprofit organizationdedicated to contributing to, encouraging, and enhancing the development ofsoundemployeebenefitprogramsandsoundpublicpolicythroughresearchandeducation.EmployeeRetirementIncomeSecurityAct(ERISA):A1974lawgoverningtheoperationofmostprivatepensionandbenefitplans, the laweasedpensioneligibility rules, set up the Pension Benefit Guaranty Corporation, andestablishedguidelinesforthemanagementofpensionfunds.fiduciary: Person, company, or association holding assets in trust for abeneficiary. The fiduciary is charged with the responsibility of investing themoneywiselyforthebenefitofthebeneficiary.funding risk: The risk that the amount of money a person saves in theirretirementplans(togetherwiththeappreciationofthoseassets)won'tbeenoughtofundtheirretirement.GenerationX:Thegenerationbornbetween1965and1979.IndividualRetirementAccount(IRA):Atax-deferredaccountsetupbyorforanindividualtoholdandinvestfundsforretirement.inflation:Theoverall,generalupwardpricemovementofgoodsandservicesinaneconomy.Inflation isoneof themajorrisks to investorsover the long termbecauseiterodesthepurchasingpowerofsavings.institutional investors: The businesses, nonprofit organizations, corporateretirement plans, and other similar investors who own investment funds andothersecuritiesonbehalfof theirorganizations.Thisclassificationof investorsdiffersfromindividualorhouseholdinvestors.interest/interest rate: The fee charged by a lender to a borrower, usually

expressedasanannualpercentageoftheprincipal.Investment Company Institute (ICI): The national association of U.S.investmentcompanieswhosemissionistoencourageadherencetohighethicalstandards by all industry participants, advance the interests of funds, andpromotepublicunderstandingofmutualfundsandotherinvestmentcompanies.investment return: The gain or loss on an investment over a certain period,expressedasapercentage.investmentrisk:Thepossibilityoflosingsomeoralloftheamountsinvestedornotgainingvalueinaninvestment.large cap: Stock with a large capitalization (numbers of shares outstandingtimesthepriceoftheshares).Large-capstockstypicallyhaveatleast$5billioninoutstandingmarketvalue.LifeInsuranceMarketingandResearchAssociation/LIMRAInternational,Inc. (LIMRA): An association of life insurance and financial servicescompanies with approximately 850 members internationally that conductsresearchandprovidesconsulting.longevityrisk: The risk of outliving one's life expectancy and using up one'sretirementsavingsandincome.lump sum: Payment of money received at one time instead of in periodicpayments.Peopleretiringfromor leavingacompanymayreceivea lump-sumdistributionofthevalueoftheirretirementplan.(Specialtaxrulesapplytosuchlump-sumdistributionsunlessthemoneyisrolledintoanIRArolloveraccount.)matchingcontributions:A typeofcontributionanemployerchooses tomakein a defined contribution retirement plan. The contribution is based on theelective deferral contributions made by the employee and often matches thatcontributionatasetpercentage.midcap:Stockwithamiddle-levelcapitalization(numbersifsharesoutstandingtimesthepriceoftheshares).Mid-capstockstypicallyhavebetween$1billionand$5billioninoutstandingmarketvalue.Millennials: The generation born between 1980 and 2000, brought up usingdigitaltechnology.mutual fund: A registered investment company that invests in a portfolio ofsecurities selected by a professional investment advisor to meet a specifiedfinancialgoal(investmentobjective).PensionBenefitGuarantyCorporation (PBGC):Federal agencyestablishedin 1974 under ERISA that insures defined benefit retirement plans offered by

private-sectoremployers.pension plan: Retirement plans that provide replacement for salary when aperson is no longer working. Employer plans can be defined benefit (DB) ordefinedcontribution(DC)plans.Pension Protection Act of 2006 (PPA): Congressional pension reformlegislation designed to encourage individual retirement savings and to makeemployer-fundedplanssubjecttostricterregulation.plan administrator: The person who is identified in the plan document ashavingresponsibilityforrunningtheplan.Itcouldbetheemployer,acommitteeofemployees,acompanyexecutive,orsomeonehiredforthatpurpose.plancompliance:Theoversightofaplan toensure that itadheres to IRSandDepartmentofLaborrulesregardingemployeebenefits.plan document: A formal, written document required by the Department ofLabor for all retirement plans that detail how a plan operates and itsrequirements.plan sponsor: A company or employer that sets up a retirement plan for thebenefitoftheorganization'semployees.portfolio:Acollectionofsecuritiesownedbyanindividualoraninstitutionthatmayincludestocks,bonds,moneymarketinstruments,andothersecurities.QualifiedDefault InvestmentAlternatives (QDIAs): Default investment forparticipantswhodonotchooseaninvestment inaretirementplan.Thedefaultaccounts includeprofessionallymanagedaccounts,balancedmutualfunds,andlifecyclemutualfunds.qualifiedretirementplan:An employer-sponsored retirement plan thatmeetsthe IRS and Employee Retirement Income Security Act of 1974 (ERISA)requirementstohavecertaintaxadvantagesforemployersandemployees.Suchplanscanbedefinedbenefitplansordefinedcontributionplans.replacementratio: The percentage of current income that youwould need inretirementtomaintainyourcurrentstandardofliving.retirement ready: The state in which an individual is well-prepared forretirement, should it happen as planned or unexpectedly, and can continuegeneratingadequateincometocoverlivingexpensesthroughouthis/herlifetimethrough retirement savings and investments, employer pension benefits,governmentbenefits,and/orcontinuingtoworkinsomemannerwhileallowingforleisuretimetoenjoylife.return:Thegainorlossofasecurityinaparticularperiod.Itisusuallyquoted

asapercentage.risktolerance:Aninvestor'swillingnesstolosesomeorallofaninvestmentinexchangeforgreaterpotentialreturns.Saver'sCredit:Taxcredit thatencouragessavingforretirement.Helpspeoplepay less federal tax by contributing to a company-sponsored retirement plan,suchas401(k)plan,orindividualretirementaccount(IRA).Section 404(c): A section of ERISA that provides voluntary guidelines that aplansponsorcanfollowwhichenable themtoeffectively transfer thepotentialliability associated with investment decision-making to employees whoparticipateina401(k)orotherparticipant-directeddefinedcontributionplan.shareholder:Aninvestorwhoownssharesofamutualfundorothercompany.SilentGeneration:Thegenerationbornbetween1925and1945.small cap: Stocks with a small capitalization (numbers of shares outstandingtimes the price of the shares). Small-cap stocks typically have less than $1billioninoutstandingmarketvalue.stablevaluefund:An investment fund that seeks topreserveprincipal and toprovide consistent returns and liquidity. Stable value funds include collectiveinvestmentfundssponsoredbybanksortrustcompaniesorcontractsissuedbyinsurancecompanies.stock:Ashareofownershiporequityinacorporation.targetdate fund:A fund that invests in amix of asset classes and follows apredetermined reallocationof riskover time forapersonexpecting to retireatthe target date of the fund. They typically rebalance portfolios over time tobecomemoreconservativeandincomeproducing.Third-PartyAdministrator(TPA):Anentityotherthanaplansponsorthatisresponsibleforadministeringaworkplaceretirementplan.Treasury Inflation Protected Securities (TIPS): U.S. Treasury securitiesissued at a fixed rate of interest butwith principal adjusted every sixmonthsbasedonchangesin theConsumerPriceIndex.TIPSsacrificesomeyieldasatradeofffortheinflationprotection.vesting:Rightanemployeegraduallyacquiresbylengthofserviceatacompanytoreceiveemployer-contributedbenefits,suchasmatchingcontributions to theretirementplan.Bylaw,employeesmustbevested100percentafteramaximumofsevenyears.

ListofContributors

NevinAdamsNevin Adams joined the Employee Benefit Research Institute (EBRI) asDirector, Education and External Relations and Co-Director, EBRI Center forResearchonRetirementIncome(CRI)in2011,andwasnamedDirectoroftheAmerican Savings Education Council (ASEC) in May 2012. EBRI is anonprofit,nonpartisanresearchandeducationfirmlocated inWashington,DC.Prior to that he spent a dozen years as Global Editor-in-Chief ofPLANSPONSORmagazineanditswebcounterpart,plansponsor.com,aswellasPLANADVISER andPLANSPONSOR Europemagazines, andwas the creator,writer, and publisher of plansponsor.com's NewsDash, the industry's leadingdaily source for information focused on the critical issues impacting benefitsindustryprofessionals.Beforethathespent twodecadesinseniormanagementpositions at two large national financial institutions working with workplaceretirement plans. He graduated summa cum laude with a BS in finance fromDePaulUniversityinChicago,Illinois,andin1988hereceivedhisJD,alsofromDePaulUniversity.

TedBennaTedBennaiscommonlyreferredtoas“thefatherof401(k)”becausehecreatedandgainedIRSapprovalofthefirst401(k)savingsplan.Hehasreceivedmanycitationsforhisaccomplishments,includingthe2001NationalJeffersonAwardforGreatestPublicServicebyaPrivateCitizenandthe2001PlayeroftheYearAward,selectedbyDefinedContributionNews.HewasoneofeightindividualsselectedbyMoneymagazineforitsspecial20thAnniversaryHallofFameissue,was selected byBusiness Insurance as one of the four People of theCentury,was one of 10 selected by Mutual Fund Market News for its special 10thAnniversary Legends in Our Own Time issue, and received the LifetimeAchievementAwardbyDefinedContributionNews in 2005.Ted has authoredfourbooks,thelatestofwhichis401(k)sForDummies.

KentG.CallahanKentCallahan is amember of theTransamericaU.S.ManagementBoard andserves as President and CEO of the Employer Solutions & Pension (ES&P)division,whichservesmorethan34,000institutionalcustomersand3.2millionAmericanworkers.Kent has dedicated more than 30 years to the financial services industry,

including 25 years with AEGON/Transamerica. He is a frequent speaker atmajorpension industryevents throughout theUnitedStates andglobally.Kenthasbeennamedby401kWire.comasoneofthetop50“MostInfluentialPeoplein Defined Contribution. Kent also serves as a member of LIMRA's PensionLeadership Committee and is Chairman of the Transamerica Center forRetirementStudies.

JohnCarlJohnCarlisFounderandPresidentofRetirementLearningCenter,thenation'spreeminentthoughtleaderonretirementissues,aswellasfoundinglecturerforThe Retirement Advisor University (TRAU) at UCLA Anderson School ofManagement Executive Education, and Executive Director of thePLANSPONSOR Institute, the education and training arm ofPLANSPONSOR.John released his first book in 2009, Retirement Resource Guide: EssentialERISAEducation&BestPractices forFinancialAdvisors, which received anAPEX Grand Award for publishing excellence. For 2012, 401kWire.comidentifiedJohnasoneofthemostinfluentialindividualsinthe401(k)industryforthesixthconsecutiveyear.

CatherineCollinsonCatherine Collinson serves as President of the Transamerica Center forRetirementStudies,andisaretirementandmarkettrendsexpertandchampionforAmericanswhoareat riskofnotachievinga financiallysecureretirement.Catherine oversees all research and outreach initiatives, including the AnnualTransamericaRetirementSurvey.Withover15yearsofretirementservicesexperience,Catherinehasbecomea

nationally recognized voice on retirement trends for the industry. She has

testified before Congress onmatters related to employer-sponsored retirementplansamongsmallbusinesses,whichhavefeaturedtheneedtoraiseawarenessof theSaver'sCreditamong thosewhowouldbenefitmost fromthe importanttaxcredit.Catherineisregularlycitedbytopmediaoutletsonretirement-relatedtopics.Her expert commentary has appeared inmajor publications, including:theWallStreetJournal,U.S.News&WorldReport,USAToday,Money,theNewYorkTimes,HuffingtonPost,Kiplinger's,CBSMoneyWatch,LosAngelesTimes,Chicago Tribune, Employee Benefits News, and HR Magazine. She has alsoappeared on PBS' Nightly Business Report, NPR's Marketplace, and CBSaffiliatesthroughoutthecountry.CatherineearnedherBAinBritishandAmericanliteratureatScrippsCollege,

Claremont,California,andherMBAattheUniversityofCalifornia,Irvine.

PaulD'AiutoloPaul D'Aiutolo is an Institutional Consultant at UBS Financial Services.Primarily focused on providing fiduciary and risk management services tocorporate investment committees, and educational services to the participantstheygovern,Paulleadsateamwithover100institutionalclientswithassetsinexcess of $1 billion. Paul has been acknowledged by numerous industryassociationsasaninfluentialvoiceandadvocate,including2012recognitionasaTop Ten Mid-Market Advisor by 401kWire.com and a finalist for the 2009PLANSPONSORandPLANADVISERRetirementPlanAdvisoroftheYear.

MikeDiCensoMikeDiCensoistheNationalPracticeLeaderatGallagherRetirementServicesandthePresidentofGallagherFiduciaryAdvisors,LLC.Mikehasmorethan25years of experience in the retirement plan arena and is considered a thoughtleader on issues such as fiduciary processmanagement, fee transparency, andindustry trends. In 2008, 2009, and 2010Mike was recognized as one of themost influential people in the 401(k) industry by 401kWire.com and wasacceptedintotheRetirementAdvisoryCouncilin2011.

BrianH.Graff

BrianGraffbeganservingastheExecutiveDirector/ChiefExecutiveOfficerofASPPA in 1996. Brian actively speaks on behalf of the employer-sponsoredpensionsystemandhasbeenquotedintheWashingtonPostandtheWallStreetJournal, aswellas interviewedonBloombergTV. In2011,he testifiedbeforetheU.S.DepartmentofLaborontheproposeddefinitionoffiduciaryregulation,and was instrumental in the creation of the National Association of PlanAdvisers (NAPA)—the first organization dedicated to serving retirement planadvisors.Brianreceivedhisdoctoraldegree in law,cumlaude, fromtheUniversityof

Pennsylvania Law School in Philadelphia. He holds a BS in accounting withdistinctionfromCornellUniversityinIthaca,NY.

PaulS.HenryPaul Henry is the Managing Director of Retirement Clients and Products atLIMRAInternational.Paulhasmorethan25yearsofexperienceinthefinancialservicesindustry,including20yearsasastrategist,headofmarketing,andheadof product development for industry leaders in the retirement market. In hiscurrentrole,PaulisresponsibleforensuringthatLIMRAmemberswhoare,orseek to be, active in the retirement market fully benefit from LIMRA's widerange of industry-leading resources, including research, compliance support,training,andconsultingservices.

J.MarkIwryMarkIwryisSeniorAdvisortotheSecretaryoftheTreasuryandistheDeputyAssistant Secretary for Retirement and Health Policy at the U.S. TreasuryDepartment.MarkwaspreviouslyaNonresidentSeniorFellowattheBrookingsInstitution,ResearchProfessoratGeorgetownUniversity,OfCounseltothelawfirmof Sullivan&CromwellLLP, and a Principal of theRetirement SecurityProject.Hewas theTreasuryDepartment'sBenefitsTaxCounsel (1995–2001),servingastheprincipalofficialdirectlyresponsiblefortaxpolicyandregulationrelating to the nation's qualified pension and 401(k) plans, employer healthplans,andotheremployeebenefits,andpreviouslywasapartnerinthelawfirmof Covington & Burling LLP. Mark has often testified before congressionalcommittees—representing the Treasury and ExecutiveBranch or,while in the

private sector, testifying as an independent expert—and State legislatures; hasadvisednumerousSenators,membersofCongress,andtheirstaffsonbothsidesoftheaisle,aswellasvariousPresidentialcampaigns.Inrecentyears,Markhasbeen recognized as one of the 30 Top Financial Players (Smart Moneymagazine),oneofthe100MostInfluentialPeopleinFinanceandoneoffiveinthe fieldofRetirement andBenefits (TreasuryandRiskmagazine), oneof the100 Most Influential People in the 401(k) Industry (401kWire.com),InvestmentNewsPower20(20individualsexpectedtohaveamajorinfluenceonthefinancialservicesindustry).

ToddLaceyTodd Lacey is the Senior Vice President of Strategic Distribution atTransamerica Retirement Solutions. Prior to joining Transamerica, Todd wasPresidentandFounderofThe(k)LarityGroup,aretirementplanconsultingfirm.Lacey isa frequent speakeratnationalconferencesand isactively involved inmultipleorganizations, includingasco-chairof theASPPA401(k)Summit.HealsoservesasaBoardofDirectormemberfor theASPPABenefitsCouncilofAtlantaand theASPPAInvestmentProfessionalCommittee.He isco-editoroftheASPPAAdvisorUpdate, a bimonthly newsletter delivered to thousands ofadvisorsacrossthecountry.

ChadJ.LarsenChadLarsenisthePresidentofMoretonRetirementPartners.Chadhasworkedwithhundredsofemployershelping them to implementprudentprocesses thathaveimprovedtheparticipantoutcomesoftheirplans.Heisafrequentnationalspeaker for the retirement industry and has given numerous retirement planworkshops to educate employers on the key elements of successful retirementplans. Chad was recently inducted into the 2011 Advisor Hall of Fame byPLANADVISERmagazine, andwas also selected as the 2007Retirement PlanAdvisoroftheyearbyPLANSPONSORmagazine.

JosephJ.MastersonJoseph J. Masterson, Senior Vice President and Chief Marketing Officer of

TransamericaRetirement Solutions,was a founder ofDIVERSIFIED and is amemberoftheirSeniorLeadershipTeam.JoeispastChairpersonoftheRetirement&InvestmentMarketingCommittee

– LIMRA International; a longstandingmember of AIMSE; amember of theInvestment Management Consultants Association; a member of the editorialadvisoryboardoftheJournalofPensionBenefits;amemberoftheLeggMasonRetirement Advisory Council; EACH Enterprise From Research to SalesSuccessAdvisoryBoard,andDCIIAfoundingboard.He isa frequent speakerandauthoronretirementplansandassetallocationstrategies.Hehashelpedmanyorganizationsaddresstheirpensionconcernsandarriveat

client-drivensolutions.Heisa leader inhelpingpeoplesaveand investwiselyfor retirement, coining the phrase “Save 10.” He was named 19th “MostInfluentialPersoninthe401(k)Industry”in2012by401kWire.com.

J.FieldingMillerJ. FieldingMiller is theCEOofCAPTRUSTFinancialAdvisors.As an earlypioneer in the retirement advice industry, Fielding is a frequent speaker andactiveparticipant invarious industryassociationsandrecognizedasoneof the2012Top50“MostInfluentialPeople inDefinedContribution.”Heisalsotherecipient of the first ever PLANADVISER Magazine Lifetime AchievementAwardin2012.

JohnB.MottWithmorethan30yearsinthefinancialservicesindustry,JohnB.Mottfocuseson themanagement and design of qualified and nonqualified retirement plansand is responsible forover50corporateplansacross thecountry thatmakeupover 100,000 plan participants. John also holds the PLANSPONSORRetirementProfessional (PRP) designation.Hewon the2005RetirementPlanAdvisorof theYearbyPLANSPONSORmagazine.Hewasalso recognizedasoneofthenation's2010Top100AdviserandAdviserTeamsbyPLANADVISERmagazine.

JosephW.Mrozek

AsManagingDirectorandHeadofSmallandMiddleMarketsSalesforGlobalWealth and Retirement Services (GWRS) and the Business and GlobalCommercialBanks,JoeMrozekisresponsibleforsalesinthe$0–$100millionmarket segment for the Institutional Retirement and Benefits Services (IRBS)GroupatBankofAmericaMerrillLynch.AtBankofAmericaMerrillLynch,“Wehelppeopleatworkattainfinanciallysecurefuturesinaworldwhereitisincreasinglyhardtodoso.”

FredReishFred Reish is the Partner/Chair, Fiduciary Services ERISA Team at DrinkerBiddle & Reath, LLP. He has been recognized as one of the Legends of theretirement industry by both PLANADVISER magazine and PLANSPONSORmagazine.Fredalsoreceivedawardsfor:the401(k)Industry'sMostInfluentialPerson by 401kWire.com; the Commissioner's Award and District Director'sAward by the IRS; the Edison Founder's Award by the American Society ofProfessionals and Actuaries (ASPPA); the Institutional Investor and thePLANSPONSOR magazine Lifetime Achievement Awards; and theASPPA/Morningstar 401(k) Leadership Award. He co-chaired the IRS LosAngelesBenefitsConferenceforover10years,servedasafoundingco-chairoftheASPPA401(k)Summit, andhas servedon theSteeringCommittee for theDOLNationalConference.

CharlesRuffelCharlesRuffel is theManagingPartneratKuduAdvisors.Charles isa leadingauthority on global pension issues, institutional money management, andinternationalsecuritiesservices.Prior tofoundingKuduAdvisors,CharleswastheFounderandCEOofAssetInternationalandwasafinancialjournalistwithInstitutionalInvestor,NewYork,andFinancialMail,Johannesburg.

DallasSalisburyDallasSalisbury,PresidentandCEOoftheEmployeeBenefitResearchInstitute(EBRI),joinedEBRIatitsfoundinginWashington,DC,in1978.Asamemberof a number of commissions, Mr. Salisbury assists study panels as well as

editorial advisory boards.He is a Fellow of theNationalAcademy ofHumanResources. He currently serves as an appointee of President Obama on thePBGCAdvisoryCommittee(havingservedinthelate1980sasanappointeeofPresident H. W. Bush) and an appointee of the Comptroller General of theUnitedStatestohisBoardofAdvisors.HeisapastmemberoftheBoardoftheNAHR, the NAHR Foundation, the Securities and Exchange CommissionInvestor Advisory Committee, the Board of Directors for FINRA InvestorEducation Foundation, on the Secretary of Labor's ERISA Advisory Council,Board of Directors of the Society for Human Resources Management, U.S.Advisory Panel on Medicare Education, and the Board of Directors of theNationalAcademyofSocialInsurance.DallashasbeenhonoredwiththeAwardforProfessionalExcellencefromthe

Society for Human Resource Management, the PLANSPONSOR LifetimeAchievementAward,andtheKeystoneAwardofWorldatWork,andin2012thePublic Service Award of the International Foundation of Employee BenefitPlans.Dallaswasadelegatetothe1998,2002,and2006NationalSummitsonRetirement Savings, and the 2005WhiteHouse Conference onAging. Dallasaccepted a 2007 National Emmy Award for Savingsman and the Choose toSave®publiceducationprogram.

JayVivianJayVivian retired in late2007asheadof IBM's$135billion retirement fundssystem,whereheledthefunds'successfulweatheringof2001to2002'sfinancialperfect storm, several benefit redesigns, and oversaw implementation of assetdiversification and LDI. He is on the board of ICMA-RC, theinvestment/pension committee of United Way Worldwide, and is on theCommittee on Investment of Employee Benefit Assets (CIEBA).PLANSPONSOR magazine named IBM Plan Sponsor of the Year in 2006,Treasury&Risknamedhimoneofthe100MostInfluentialPeopleinFinancein2007, and PLANSPONSOR gave him their Lifetime Achievement Award in2010.HehasbeenfeaturedinarticlesandinterviewsintheWallStreetJournal,USAToday,MSNMoney,P&I,InstitutionalInvestor,andaiCIO.

IndexAAARPU@50contestAdams,NevinAdCouncilAdvertisingcampaignsAdvisors.SeeRetirementplanadvisorsAggressive,definitionofAmericanExpressCompanyAmericanRecoveryandReinvestmentActAmericans,all,lettertoAmericanSocialSecuritysystemAmericanSocietyofPensionProfessionals&Actuaries(ASPPA)AnnuityAnnuityPuzzleAPFs.SeeAutomaticPlanFeatures(APFs)Apollo13(movie)AppleInc.ASPPA.SeeAmericanSocietyofPensionProfessionals&Actuaries (ASPPA)AssetallocationAssetsAudia,PinoAutomaticenrollmentAutomaticescalationAutomaticPlanFeatures(APFs)

BBabyBoomersBach,DavidBacon,SirFrancisBandura,AlbertBankruptcy,retireesandBBC.SeeBritishBroadcastingCorporation(BBC)BearmarketBehaviors,new,fosteringBeliefs,powerof

Benartzi,ShlomoBenefitplansBenna,TedTheBirthofaNation(movie)Bismarck,OttovonTheBlackSwan(Taleb)Bloom'sTaxonomyBond,definitionofBritishBroadcastingCorporation(BBC)Broker-dealerBudgetdeficitBullmarket,definitionofBureauofLaborStatisticsBurson-Marsteller's2011CrisisPreparednessstudyBush,GeorgeW.Businessworld

CCallahan,KentCardin,BenCarl,JohnCarstensen,LauraL.Centenarian,AmericanCenters for Disease Control and Prevention (CDC) CES. See Committee onEconomicSecurity(CES)Chambers,JohnCivilizedsociety,hallmarkofClickItOrTicketClintonGlobalInitiativeCody,IronEyesCoffman,JuliaCollectiveinvestmenttrusts/fundsCollinson,CatherineCommittee onEconomicSecurity (CES)Company-sponsored retirement plansCompounding,definitionofConservative,definitionofConsumerismContext,powerofCorporatepensionplansCorporateretirementplans

Costa,DoraL.The Cost of Living Longer—Much Longer (Passy)Counterclockwise:MindfulHealthandthePowerofPossibility(Langer)Coverage

DD’Aiutolo,PaulTheDancingManDBplans.SeeDefinedbenefit (DB)plansDCplans.SeeDefined contribution(DC)plansDeathofaSalesman(Miller)Default,definitionofDeferralrate,definitionofDefinedbenefit(DB)planschallengesofdefinitionofearlydaysoffactorsleadingtounderfundingasliabilitytocompaniesunderfundedvs.definedcontributionplansDefinedcontribution(DC)plans:definitionoflowerandmiddle-incomeearnersorganizationsriseofsuccessofvs.definedbenefitplans

DepartmentofLabor(DOL)DiCenso,MikeDiversification,definitionofDOL.SeeDepartmentofLabor(DOL)Duhigg,CharlesduPont,ThomasColeman

EEBRI.SeeEmployeeBenefitResearchInstituteEchoBoomers.SeeMillennialsEconomic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA)EconomicStimulusActof2008EGTRRA. See Economic Growth and Tax Relief Reconciliation Act of 2001

(EGTRRA)80%incomereplacementratioEliLilly'sInnoCentiveEmployeeBenefit Research Institute (EBRI). See EBRI EmployeeRetirementIncomeSecurityAct(ERISA)Employees,investmentchoicesofEmployerretirementplansEmployer-sponsored retirement plan, participation in ERISA. See EmployeeRetirement Income Security Act (ERISA) The Evolution of Retirement: AnAmerican Economic History 1880–1990 (Costa) Executive Office of thePresident—CouncilofEconomicAdvisersreportFFederalReservereport(July,2011)“FeedthePig”(initiative)FidelityThoughtLeadership:Auto-EnrollmentFiduciaryFigliuolo,MikeFinancialdignityFinancialliteracy:definingimprovingstateof,argumentsabout

FinancialregretsFinancialsecurity,inretirementFinancialservicesindustryFirst Follwer: Leadership Lessons from the Dancing Guy (video) The FixedPeriod(Trollope)ForbesFord,Gerald401(k)account,averagebalanceofAmericansin401(k)planannuityindefinitionofevolutionofportabilityof

401(k) Plans: A 25-Year Retrospective (Investment Company Institute) 401(k)SavingsActof2011401(k)Whisperers403(b)planFrost,MathewFundingriskFutureEarlyRetirees

GGapingVoidblogpost“Garage”phenomenon(Audia)GenerationXGenerationYGiantRobot(magazine)Gladwell,MalcolmGlossaryGoneTomorrow:TheHiddenLifeofGarbage(Rogers)GoogleGoogle'sSolveforXGoss,StephenC.GovernmentresolveGraebner,WilliamGraff,BrianGreenspan,AlanGreenwald,BruceGriffith,D.W.

HHaley,AmyHargadon,AndrewHarvardBusinessReview(magazine)Heath,ChipHeath,DanHenry,PaulHewlett,BillHewlett-PackardHighwayBeautificationActof1965Historyof401(k)Plans(EBRI'sreport)HistoryofRetirement:TheMeaningandFunctionofanAmericanInstitution(Graebner)Hopkins,ClaudeC.Horvath,DavidHow Breakthroughs Happen: The Surprising Truth About How CompaniesInnovate(Hargadon)IICI.SeeInvestmentCompanyInstitute(ICI)IndividualresolveIndividual retirement account (IRA) Individuals, retirement readiness and

IndustryresolveInflation,definitionofInnovation,disruptiveInstituteforLocalSelf-RelianceInstitutional investor, definition of Institutional Investor (magazine)Interest/interestrate,definitionofInternalRevenueCodeInternalRevenueService(IRS)Investmentchoices,employeesandInvestmentCompanyInstitute(ICI)Investmentreturns:definedbenefitplansanddefinitionof

InvestmentriskIRA. See Individual Retirement Account IRS. See Internal Revenue Service(IRS)Iwry,Mark

JJain,NaveenJames,WilliamJohnson,LadyBird

KKAB.SeeKeepAmericaBeautiful(KAB)campaignKendall,KennethKennedy,JohnF.Kim,Sun-Min

LLacey,ToddTheLadywiththeLampLanger,EllenLargecap,definitionofLarsen,Chad

LatteFactor®

LeakageLeggMasonAdvisoryCouncil

LifeexpectancyLIMRA. See Life Insurance Marketing and Research Association/LIMRAInternational,Inc.(LIMRA)Littering,contextofLogan'sRun(movie)Loman,WillyLongevityLongevityriskLower-income households, saving for retirement of Low-income earners,participationincontributionplanLumpsum,definitionofLusardi,Annamaria

MMade to Stick: Why Some Ideas Survive and Others Die (Heath and Heath)MarketingtheseniorcitizenMatchingcontributionsMcDonald'sCorporationMcKee,RobertMcLeod,HughMedicalprofession,NightingaleMidcap,definitionofMiddle-incomeearners,participationincontributionplanMillennialsMiller,ArthurMiller,FieldingMoneyAsYouGrow:20ThingsKidsNeedToKnowToLiveFinanciallySmartLives(website)Morgan,JoyElmerMorgenthau,HenryMott,JohnMrozek,JoeMutualfund,definitionof

NNakamura,EricNationalAeronautics and SpaceAdministration (NASA)NationalCouncil forExcellenceinCriticalThinkingNationalForestServiceNational Foundation forCredit Counseling (NFCC)NationalHighwayTraffic

SafetyAdministration(NHTSA)NationalIndustrialConferenceBoardNationalInstituteonRetirementSecurity(NIRS)NationalsocialinsurancesystemNationalWomen'sHealthNetworkclaimsNetgeneration.SeeMillennialsNewYorkTimesNFCC.See National Foundation for Credit Counseling (NFCC) NHTSA. SeeNational Highway Traffic Safety Administration (NHTSA) Nightingale,Florence, 90–10–90 plan success metrics NIRS. See National Institute onRetirementSecurity(NIRS)NonagenariansNotesonHospitals(Nightingale)NotesonNursing(Nightingale)OObama,BarackOfficeofWarInformation“OldAgePensions”(Roosevelt)One Piece of Paper: The Simple Approach to Powerful, Personal Leadership(Figliuolo) Organizations, retirement readiness The Origins of Anti-LitterCampaigns(Plumer)Osler,WilliamOutliers:TheStoryofSuccess(Gladwell)Overspending,habitual

PPassy,CharlesPBGC.SeePensionBenefitGuarantyCorporation(PBGC)Pension,politicsPensionBenefitGuarantyCorporation(PBGC)Pensionplan(s)PensionProtectionAct(PPA)of2006PensionsandRetirementSecurity2011:ARoadmapforPolicymakers(NationalInstituteonRetirementSecurity)Perkins,GeorgeW.PersonalfinancePink,DanielPlanadministratorPlancompliancePlandocumentPlanperformancemetricsPlanproviders.SeeRecordkeepers/planprovidersPlansponsorPlanSponsorCouncilofAmerica(PSCA)PlanSponsor/Employer,lettertoPLANSPONSOR(magazine)PlansponsorresolvePolicymakers,letterto

Politics,pensionPortman,RobThePowerofHabit:WhyWeDoWhatWeDo inLife andBusiness (Duhigg)PPA.SeePensionProtectionAct(PPA)of2006President's Advisory Council on Financial Capability President's AdvisoryCouncilonFinancialLiteracyPrivatedefinedbenefitplansPrivatepensionplansProfit Sharing Council of America (PSCA) PSA. See Public ServiceAnnouncement (PSA) PSCA. See Plan Sponsor Council of America (PSCA);Profit Sharing Council of America (PSCA)Public Communication CampaignEvaluation: An Environmental Scan of Challenges, Criticisms, Practice, andOpportunities(Coffman)PublicServiceAnnouncement(PSA)Public-willcampaigns

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Responsibility,personal,retirementreadinessandRetirees,companybankruptcy

andRetirement. See also Retirement industry success metrics; Retirement plans;Retirementreadinesscomfortablein early part of twentieth century lower-income households and saving formarketingtheseniorcitizennotsavingenoughforpoliticsandpensionriseofself-efficacybeliefsaroundvisionof

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introductionofSuperSavers

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meaningofattheorganizationallevelpersonalresponsibilityintackling

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SSalesmanship(magazine)Salisbury,DallasSaturdayEveningPostSaveMoreTomorrow:PracticalBehavioralFinanceSolutionstoImprove401(k)Plans(Benartzi)Saver'sCreditSavingAmericawebsiteSavings:forBoomersinadequatelylearningaboutworkplace

SEAL401(k)SavingsActSection404(c)Self-efficacy“Self-Efficacy: Toward a Unifying Theory of Behavior Change” (Bandura)SeniorCitizen

Seniorcitizen,marketingSeussGeisel,TheodorShareholder,definitionofSilentGenerationSivers,DerekSmallcap,definitionofSmokeyBearSmokingisUglyCampaignSocialmediaSocialSecuritySocialSecurityActSocialSecurityOldAgeInsuranceASourceofInspiration:FutureEarlyRetirees(TCRSreport)StablevaluefundStakeholderresolveStiglitz,JosephE.Stock,definitionof“Storytelling That Moves People: A Conversation with Screenwriting CoachRobertMcKee”(McKee)StrawMancampaignStudebakerCorporationSuccess,personalizingSuperSaversSurvey of the States: Economic and Personal Finance: Education in OurNation'sSchools2011(CouncilforEconomicEducationreport)TTaleb,NassimNicholasTargetdatefund,definitionofTCRS. See Transamerica Center for Retirement Studies (TCRS) 10 percentlifetimesavingsrate“The History of Retirement, from Early Man to A.A.R.P.” (Weisman) Third-partyadministrator(TPA)ThirteenthAnnualTransamericaCenterforRetirementStudiessurveyTIPS.SeeTreasuryInflationProtectedSecurities(TIPS)TheTimesofLondonTowersWatsonTPA.SeeThird-partyadministrator(TPA)TraditionalpensionplansTransamerica Center for Retirement Studies (TCRS) Treasury InflationProtectedSecurities(TIPS)Trollope,Anthony

TheTruth(anti-smokingcampaign)Turlington,ChristyTurlingtonChristy'sSmokingTwelfthAnnualTransamericaRetirementSurveyTwentiethcentury:conceptofretirementinpensionplaninpensionprovisions

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WWarhol,AndyWarManpowerCommissionWaronTerrorWatson,ThomasJ.Weisman,Mary-LouWhat Shall We DoWith Our Old? (movie)A Whole New Mind: Why Right-Brainers Will Rule the Future (Pink)Why Baby Boomers Will Need to WorkLonger(McKinsey&Co.Report)WithdrawalrateWorkplacesavings,visionforWorldHealthOrganizationWorldInnovationInstituteWray,David

(WallStreetJournal)Article:“TheRestoftheStory”

YYeats,W.B.Yes,andtechniqueTheYoungOnes(documentary)

AbouttheAuthors

StigNyboStig Nybo believes that every American worker should be able to retire withconfidence. Named by 401kWire.com as one of the top 20 most influentialindividuals in the retirement industry, Stig has authored articles in retirementindustry tradepublicationsand thenationalpress.Asa frequentcontributor toindustry thought leadership, he also offers commentary as an industry expert,speaker, andpanelist atmajor financial servicesconferencesandeventsand isoften quoted in the national press in publications from PLANSPONSORmagazinetotheWallStreetJournal.Stig currently serves as President of Pension Sales and Distribution for

TransamericaRetirementSolutions,aleadingU.S.retirementplanprovider.Hehasapassionfortheretirementplanindustryandhascommittedmorethan20yearstopromotingbestpracticesforqualifiedretirementplans.HeservesontheboardoftheTransamericaCenterforRetirementStudies,anonprofitcorporationandprivateoperatingfoundationthatstudiesretirementtrendsandissuesfacingthe American workforce. His leadership has resulted in innovation thatretirementplansponsorsandtheirfinancialadvisorsusetohelpplanparticipantssaveandinvestwiselyfortheirretirement.StigcurrentlylivesinPortolaValley,Californiawithhiswife,Holly,andtwo

boys,AndreasandTorsten.

LizAlexander,PhDLiz Alexander's gift and passion is helping individuals and organizationstransition from experts to thought leaders. She is an author, business bookstrategist,andconsultingco-authorwhohasforthepast25yearsworkedonbothsides of theAtlantic. Liz also collaborateswith aspiring business authors andthoughtleadersinIndia.Shehaswritten11nonfictionbooksandco-authoredthreeothers.Inaddition

to consulting and speaking around the world, Liz developed and teaches the

StrategicCommunicationCertificateProgramfortheProfessionalDevelopmentCenter at The University of Texas at Austin, where she earned her PhD inEducationalPsychology.LizlivesinAustin,TexaswithherbelovedblackLabrador,Buffy.