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Saving for retirement involves sacrificing something of value today in exchange for something of value in the future. Economists have long argued that this decision is biased in favor of current values because they are more certain than future values, and also closer at hand. Saving for retirement is an extreme example because of uncertainties regarding how much and when the savings will be needed, and how much of it should be allocated to the retiree’s estate.

The consequence is pervasive procrastination in saving for retirement by low and moderate-income consumers. For many, this results in impoverishment later in life.

The mandatory savings plan administered by Social Security is an important offset but it doesn’t cut very deep, and it might depress voluntary private savings by providing a rationale for ignoring it. What is needed are programs to encourage private savings. The deficiency is not an absence of savings instruments, there are plenty of those, what is lacking is the incentive to use those instruments to save for retirement.