Many people predict that mobile technology will change the DC industry, but very few have specific, breakthrough ideas. Leave it to UCLA professor Shlomo Benartzi — who’s credited along with University of Chicago professor Richard Thaler for bringing behavioral finance theories to DC plans and spawning the auto-plan revolution — to come up with something that addresses the issue of the 78 million Americans without access to a 401(k) plan.
Benartzi suggests that phone companies create a one-click IRA app that people can use to set up and automatically contribute to an IRA. Phone companies already have all the information needed; and the account statement could be part of the monthly phone bill. He also thinks that when people feel flush or decide not to make a big purchase, they can “impulsively” put extra money away for retirement.
The IRA mobile app idea leverages one of the keys to employer sponsored retirement plans: auto-deduction, which highlights the power of savings and compound interest. The U.S. leads the world in many technologies, but mobile applications may not be one of them. Witness Kenya, where the plethora of unbanked adults stunted economic growth while fostering fraud and theft. Vodaphone created a bank-by-phone application that 70% of Kenyan adults now use.
Though there are technical tax considerations — like staying within annual contribution limits and how people would select their investments — the idea of an IRA mobile app is intriguing. Could we also tie credit card rewards and frequent flyer miles to it?
