The Real Reason People Don't Save Enough for Retirement

Trying to educate the undisciplined shifts the blame from where it should be: on America's lousy savings plans.

Is the one on the left an "Oversleeper" or a "Preemptive Planner"? (Benoit Tessier / Reuters)

Aesop would have had a straightforward explanation for why some people just can’t manage to save up for retirement: Some people are born ants—industrious and in possession of great willpower—while others are grasshoppers, living only for today.

Millennia later, sorting workers into personality-specific boxes is still the preferred way of thinking about how to get people to put more money into savings. An otherwise thoughtful survey of over 1,000 individuals and interviews with 50 people by the MetLife Mature Markets Institute identifies no fewer than 10 different variations on the grasshopper: There are “Snoozers,” “Oversleepers,” “Stewers,” “Brewers.” And then there are “Preemptive Planners,” whose radar screens are populated with future risks. If people fit into these neat buckets, the conventional savings wisdom goes, then the solution is to educate the grasshoppers to start behaving more like ants.

MetLife isn’t wrong to dwell on personality types. Researchers such as Angela Duckworth, a professor of psychology at the University of Pennsylvania, have found convincing links between personality traits and savings. Duckworth doesn’t talk about “oversleepers,” but about the Big Five personality traits: conscientiousness, agreeableness, neuroticism, openness, and extroversion. Conscientious types, she’s found, tend to save more money.

But while MetLife and Duckworth may have identified some traits associated with inadequate saving, telling people to buckle down is unlikely to do very much, because, by adulthood, personality traits are more or less fixed. A lack of discipline or joie de vivre are hardly the main reasons some people don’t put enough into their 401(k)s or IRAs; the blame lies not with individuals but with the nation’s savings institutions.

Even if someone has access to an IRA or a 401(k), it’s difficult to stash away money—there are always bills to pay or relatives in need of financial assistance. But the fact is, as of 2012, only about half of workers have access to such plans, which makes saving even more difficult. Conscientiousness has little to do with it: Generally speaking, one of the most common answers people give when asked why they aren’t saving for retirement is that they simply don’t have enough money.

Since at least the Victorian era, there has been a ready retort. The problem isn’t a lack of money, many have insisted—it’s misspending. In fact, Victorian social reformers spearheaded a financial-literacy campaign, inflicting “home economics” on a generation of girls. The blame for bad behavior and insufficient savings was placed squarely on women, who were accused of failing to manage their household’s finances.

Economists and boards of education deploy a variant of that thinking today, forcing boys and girls to perform compound-interest calculations to impress upon them the virtues of saving money. But it is apparently not obvious that imposing stock-market games and pamphlets about IRAs on fourth graders—as several states do—will probably not bring many dividends.

Foisting financial literacy or personality transplants onto workers wouldn’t be necessary if there existed a universal savings account, modeled on Social Security. If all workers were automatically enrolled in a savings account that couldn’t be tapped into until retirement (or disability, if that came first), they wouldn’t be burdened with investment decisions. The various proposals for such an account assume a similar structure: The government would let workers contribute to it directly from their paychecks, and it would be managed for them by an independent, government-appointed committee, much like the Pension Benefit Guaranty Corporation or the board that oversees Social Security.

Instead of a retirement-savings system that punishes certain people for being less disciplined, there needs to be a system that acknowledges a simple truth: There will always be both grasshoppers and ants.