People tend to fall into one of three categories when they are planning for their retirement. Do you have any idea what kind of planner you are? How about the others who are participating in your retirement plan? The answers to these questions offer valuable insight into the strategies to use for your personal savings as well as the design features of any retirement plan for which you have a responsibility.


Ever since defined contribution (DC) plans were introduced, there has been a lot of hand-wringing as to how to get workers to save more for their retirement. For too many, telling them—even trying to scare them—that they need to save more hasn’t worked.

On top of this, there has been concern regarding the investment choices workers are making with their retirement funds. Some people are investing far too conservatively while others are taking way too many risks. What is the solution?

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Reading Shlomo Benartzi’s book Save More Tomorrow was a light-bulb moment for me. Benartzi, a behavioral economist and professor at UCLA, has proposed that people facing retirement decisions fall into three categories. The individuals in each group want something different from their retirement plan.

  • Delegators. Conservatively, Benartzi thinks about 90% of DC plan participants are delegators—These individuals have neither the knowledge nor desire to be actively involved in managing their retirement savings and prefer professionals do it for them.
  • Fine-tuners. Another 9% are fine-tuners who want to be involved with the management of their retirement savings, but not deeply involved. A menu of five to nine core funds from which they can choose, including a target-date fund, is a nice fit for this group.
  • Customizers. The remaining 1% are customizers—These are the individuals who have extensive knowledge regarding investing and want to be extensively involved in the management of their retirement investments. Customizers prefer a much broader menu of investment options from which to choose, including specialty funds.

Some people are surprised when I tell them I’m a delegator. They know I have a pretty good understanding of the relationship between risk and return, the different types of investment assets and the value of investment diversification. In fact, I have even taught these concepts to others. Nonetheless, I decided a long time ago that I would prefer to have someone else managing my retirement savings. My reasoning centers on these points:

  • I really don’t want to spend nights and weekends trying to keep up on investment trends.
  • Even if I wanted to stay informed, there are times when I don’t have the time to do so. Moreover, when I am very busy, I feared I wouldn’t take the time to rebalance my accounts for the appropriate level of risk.
  • I know that people who try to manage their own savings rarely do better than investment professionals and index funds.

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Benartzi’s book and my personal experience has helped me realize that expecting every worker to become a customizer—or even a fine-tuner—is unrealistic. The investment world has become far too complex and is constantly changing. Furthermore, few people have the combination of time, knowledge, inclination and emotional fortitude to successfully go their own way when managing their retirement funds.

Plan sponsors and administrators offering DC plans are wise to focus on strategies that accept most workers are delegators:

  1. Offer a workplace retirement plan with automatic payroll deductions.
  2. Offer a one-stop, professionally managed, well-diversified portfolio with automatic rebalancing and risk reduction as workers move closer to retirement—for example, a target-date mutual fund.
  3. Make sure the investment options available to workers have reasonable fees.
  4. Use automatic enrollment, escalation and stretch matches to increase the likelihood workers will have sufficient savings.
  5. Provide some basic rules of thumb and/or tools that will help workers quickly and easily determine their individual retirement needs and how much they must save each year to meet these needs. Providing free or low-cost access to a financial advisor to do this for workers is even better.
  6. As workers near retirement, offer lifetime income options (e.g., annuities) and guidance that will help ensure retirees will not outlive the income from their savings. Again, individualized advice from a professional is the best strategy.

While there is a long list of other things that employers, plan sponsors and plan administrators can do to promote saving for retirement, these six items can go a long way in helping workers with a DC plan achieve a financially secure retirement.

Read reports from the International Foundation concerning retirement security (Canada, U.S.), for suggestions on how to help those in the workplace determine their retirement goals and where they stand with respect to accomplishing these goals.


Pat Bonner, Ph.D., CEBS

3 thoughts on “Matching Worker Retirement Planning Styles

  1. Charles Miller

    The Benartzi framework matches closely the work of educational psychologist Angela Duckworth who says only 16% of the population may be conscientious enough to create and follow through with a financial plan in the long term.

    One thing you mention that you may like to reconsdier… rules of thumb likely lead to bad planning. There is so simple formula to gauge retirement readiness. Every situation is so unique that rules of thumb do more to misinform than inform.

    That increases the need for comprehensive, individualized retirement planning.

  2. Pat Bonner

    Charles: I share your concern regarding rules of thumb. As I state in my blog, professional advice is much preferred. Unfortunately, many people choose not to seek out such advice or cannot afford to pay for professional advice. I have had to accept that rules of thumb are sometimes better than nothing. When a rule of thumb is used, there must be lots of caveats!!

    1. Charles Miller


      If you are in a workplace retirement plan, then you should have access to advice, even if it’s robo advice. Most plans have at least offer minimum online advice.

      Of course, people have to want help. It’s one thing to know you’re an addict, it’s another thing check yourself into rehab.

      Since most won’t go to rehab, a sponsor should have a (low fee) TDF or Managed Account default and communicate that it’s for those that can’t invest for themselves.

      One more thing, if I was plan sponsor I’d only allow self-direction if a participant could pass an investment literacy test. If you don’t know the difference between debt and equity, or growth and value, you shouldn’t be allowed to invest yourself.

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