The most important driver of wealth creation is investor behavior, not investment performance. Taking their queues from research in behavior finance, big companies are helping steer investors to make good decisions and help secure their financial future.
New data reported by the Vanguard Group shows that
- nearly 100% of the companies advised by Vanguard have default enrollment (i.e., employees are automatically enrolled in the retirement plan unless s/he opts out)
- 39% of plans automatically deduct 4% or more of employee’s pay for retirement contributions
- ~70% of plans automatically increase the employee’s contribution annually
- ~95% of plans automatically invest contributions in a target-date fund
These three actions — auto-enrollment, auto-increase, and target-date fund default investment — are considered best-in-class behaviors for employers and they’re becoming more prevalent.