Inertia – Having to make a decision prevents participants from taking any action at all.

Solution: Auto Enrollment -Not at 3% but at 5-6%.  According to a New York Life Retirement Plan Services analysis, there is no evidence that the higher initial enrollment rates results in lower participation.

Loss Aversion -The fear of losing their investments outweighs the potential gains.

Solution: Auto Escalation – Time increases in contributions to coincide with the beginning of the New Year or when employees receive a raise.  Also, consider increasing the cap on auto escalation to 10% to help employees save the ideal percentage of income for retirement

Myopia – Participants focus on the short term benefits of extra cash at hand rather than the future benefits of a healthy retirement account.

Solution: Education and Awareness – Plan sponsors should make an effort to ensure participants are aware of the services and tools offered with their Plan.  The retirement industry has developed some interesting new tools to help participants plan for retirement such as the aging apps that show younger  participants what they will look like when they get to retirement age – hopefully increasing their sense of urgency to save.