The digital era · 2000–today
2006
Automatic enrollment
The Pension Protection Act makes it easier to sign workers up for retirement saving by default.
Research found that many workers never got round to joining their 401(k), even with a match on offer. The Pension Protection Act of 2006 made it easier for employers to enroll workers automatically and raise their savings rate a little each year, while letting anyone opt out.
Participation rose sharply at companies that switched to automatic enrollment. The default had turned out to matter as much as the incentive.
💡 Why it made sense then
People tend to stick with whatever happens if they do nothing, so a good default helps them save.
Ideas it gave us
- 🧭 Savings rate
Your savings rate is the share of your income you save or invest. A common rule of thumb is to put at least 15% of pre-tax income toward retirement, counting any employer match.
- 🧭 401(k)
A 401(k) is a US retirement account offered through an employer. You invest part of each paycheck, with a tax break now (traditional) or later (Roth), and the money is meant to stay until retirement.
Practise with $10,000 in play money
Free. No real money involved.