Many of you know, or know of, Shlomo Benartzi, the Behavioral Economist from UCLA who studies retirement behavior. I had the pleasure of testifying with him in the DOL/Treasury Lifetime Income hearings.
Professor Benartzi wrote an intriguing article in P&I, discussing the need for innovation in the retirement marketplace, and advocating the establishment of an incubator to identify and test promising new ideas which promote retirement security. In particular, Shlomo noted the growing acknowledgement of the problem of leakage from defined contribution plans.
In an almost stealth–like way, innovation is creeping into the marketplace and creating ways to address critical retirement issues, even without an incubator. Though these programs can do little to address what I view as the basic retirement inadequacy issue-that is, employers are generally moving away from the traditional notion of building adequate retirement programs into their employment models-they are making progress toward making the best of what we’ve got.
Examples of some of these programs with which our firm has been actively involved are worth discussing. We take the Ted Giesel (a/k/a Dr. Suess) approach to these sorts of things. Giesel was fond of saying that he had the habit of, “looking through the wrong end of a telescope,” and that has made all the difference. For us, it is in looking at the close details of the rules with a fresh eye which is making all of the difference.
It’s worth noting that these efforts all depend heavily (and in surprisingly detailed ways) on technology. None of these programs would have been possible without the technological advancements over the past decade:
This is really just the tip of the iceberg; there are a number of other things stirring as well. By “looking through the wrong end of the telescope,” I think you’ll find that the current rules can support a great deal of innovation which can promote retirement security. We just have to look…..