The good news is most financial advisers say it is fairly simple for people to put themselves on the right path, by starting to invest early, owning a diverse range of low-fee funds, and maintaining these positions for the extremely long term, ignoring market and economic cycles and getting the benefit of compound interest.

The question, then, is how to push Americans into taking these steps, which would give them the kind of financial flexibility they wouldn’t have if they were to solely rely on programs like social security.

Read more: It’s worse than you thought: Americans are drastically undersaved for retirement

A potential answer is that the government itself could institute policies designed to push Americans into investing, perhaps even auto-enrolling people into investment programs.

According to Aron Szapiro, director of policy research at Morningstar, incentive programs could dramatically increase the number of Americans who participate in retirement programs, at minimal cost to taxpayers.

Szapiro stressed that such incentives should be considered, noting the dire state of savings. The median working-age couple only has $5,000 saved for their retirement, and just a third of Americans save in a 401(k) account, according to an analysis of the Federal Reserve’s 2013 Survey of Consumer Finances.

“We have a problem, which is that people don’t invest enough for retirement. They’re going to rely on programs like social security, which is not great for them and probably not great for the macro environment,” Szapiro said at Morningstar’s annual investment conference. “If we don’t have incentives, we’re never going to crack 50%” of investors having retirement accounts.

The issue is particularly acute for investors who work at small businesses. According to an estimate from the Census Bureau, only 18% of employees at small businesses (defined as ones with fewer than 50 employees) have access to a retirement plan offered by the company. For larger companies, with more than 500 employees, the estimated ratio jumps to 60%.

An auto-enrollment program could potentially work like social security, with a portion of paychecks automatically used for this purpose. However, rather than it paying into a pension program, it would go into an individual retirement account and accumulate over time. There is some precedent for this kind of idea. The state of Oregon already has such a program, featuring automatic enrollment and contributions that are designed to grow annually. Meanwhile, California, Connecticut, Illinois, Maryland, and Oregon are in various stages of developing so-called state-sponsored auto-IRA programs.

“Auto-enrollment is the most powerful tool we’ve ever seen,” Szapiro said, arguing that this kind of regulation was far more effective in getting individuals to contribute than tax incentives. He added that instituting such a program could be accomplished with “little to no cost” as the infrastructure for payroll processing already existed.

“Incentives are not coercive enough to achieve robust levels of retirement savings; you’re not going to solve the gap with tax incentives, at least not the current incentives.”



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