January 31, 2005

Shlomo BenartziLOS ANGELES—For his efforts in helping consumers save more for retirement, Shlomo Benartzi, associate professor of accounting at UCLA Anderson School of Management, was honored by Money Magazine with its first-ever “Class Acts” Awards. The publication featured him in its January 2005 issue.

Prof. Benartzi was recognized for his pioneering research that investigates participant behavior in defined contribution plans. (He worked in conjunction with University of Chicago professor Richard Thaler, who was also honored.) In particular, Prof. Benartzi’s research examines how individuals make financial decisions in retirement saving plans. Together, the two scholars developed “behavioral prescriptions” to assist employees in making better financial decisions. One of those prescriptions is the Save More Tomorrow™ (SMT) program.

Money Magazine, in issuing the Class Acts Awards, sought out individuals and organizations “that make a significant difference to your family's well-being.” Below is the passage from Money Magazine on Professors Benartzi and Thaler:

They Tricked Us into Saving More
Shlomo Benartzi, UCLA Anderson School of Management, and Richard Thaler, The University of Chicago

If investors are often at war with their own best interests, these guys deserve a peace prize. The problem they tackled is this: We Americans don't save enough for retirement, and it's extremely hard to persuade us to save any more. Once the money is in our pockets, or figured into our budgets, we generally won't give it up.

But Benartzi and Thaler knew from their work in the field of behavioral economics that it's much easier to convince people to give up money they don't yet have. So they developed Save More Tomorrow, which asks participants to agree in advance to have a slightly higher percentage of their salaries taken out of their paychecks each year. The increased 401(k) contribution comes out of raises, so you sock away more money without ever seeing an actual decline in your take-home pay.

The results at the first company to roll out the program were amazing. Employees who joined more than tripled their savings rate to 11.6% in 28 months. Now Benartzi and Thaler are working with providers like Vanguard and Fidelity to include the program in 401(k) plans they administer. Vanguard, for one, now offers its version at several hundred corporations.

by Amy Feldman, Jonah Freedman, Roberta Kirwan, Ellen McGirt and Donna Rosato
Money Magazine
January 2005

“The SMT program was created in response to a shift in the way companies are setting up their retirement plans,” said Prof. Benartzi. “There has been a switch from defined benefit plans to defined contributions plans, causing employees to bear the burden for making decisions about how much to save,” he added.

“The SMT program grew out of studies suggesting that many people want to save more, but often put off hard decisions that would allow them to do it. I’m honored that our pioneering behavioral research is helping individuals effectively save for their retirements and their futures.”

Currently, the United Kingdom government is testing the SMT program — an experiment that will enable Prof. Benartzi to measure participant behavior in retirement plans outside the United States.

Prof. Benartzi’s research investigates participant behavior in defined contribution plans, examining:

  • How participants make investment choices in retirement saving plans.
  • How plan participants and plan sponsors view company stock.
  • The role of plan design on participant behavior.
  • How employee saving rates can be increased.

Professors Benartzi and Thaler had they behavioral research published in the Journal of Political Economy, February 2004, Vol. 112.1, Part 2, pp. S164-S187. You can download the paper at the following link:


The two are currently working on additional “behavioral prescriptions” to help employees better diversify their retirement portfolios. Their latest working paper is available for download at the following link:


About UCLA Anderson School of Management
UCLA Anderson School of Management is perennially ranked among the top-tier business schools in the world. Award-winning faculty renowned for their research and teaching, highly selective admissions, successful alumni and world-class facilities combine to provide an extraordinary learning environment. UCLA Anderson students are part of a culture that values individual vision, intellectual discipline and a sense of teamwork and collegiality.

Established in 1935, UCLA Anderson School of Management provides management education to more than 1,400 students enrolled in MBA and doctoral programs, and some 2,000 executives and managers enrolled annually in executive education programs. Recognizing that the school offers unparalleled expertise in management education, the world's business community turns to UCLA Anderson School of Management as a center of influence for the ideas, innovations, strategies and talent that will shape the future.

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