Investing in America: Why automatic retirement savings are the future 

President Trump recently issued an executive order calling for a federal website to encourage the opening of Individual Retirement Accounts by workers who have no retirement plan at work. But decades of efforts to promote saving in IRAs show that most ordinary households are unaware of the option or are held back by inertia.

To extend retirement saving to all workers, Trump should now support federal legislation built on the concept of automatic IRAs, which are already being successfully implemented in 17 states.

Between one-third and one-half of the U.S. private-sector workforce are not covered by an employer-sponsored retirement plan. Lower-income or high-turnover workforces tend not to demand retirement plans. Also, small-business owners lack economies of scale to minimize plan costs. They may fear the added responsibilities of plan sponsorship and resist the extra demands on their limited time.

In theory, most workers without an employer plan can open an IRA on their own at almost any financial institution. But in practice, because of lack of awareness or inertia, only a limited number do so. 

To overcome these barriers, the Treasury Department in 1998 approved automatic enrollment in retirement plans, encouraging 401(k) sponsors to put all eligible employees into their plan, contributing at a pre-specified percentage of wages and investing in a pre-specified fund of diversified stocks and bonds (e.g., a balanced or target date fund). But employees are always free to opt out of the plan entirely or choose a different contribution percentage or investment.

This powerful strategy for facilitating retirement contributions and improving investments has transformed the 401(k)........

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