Weakonomi¢s » investing

When The Next Too Big To Fail, Fails

The Weakonomist — Thu, 17 May 2012 14:21:10 +0000

One of the issues with the financial crisis was a government that wasn’t sure what to do with failing companies. When a company failed they could either let it go into bankruptcy or bail it out. Some were allowed to fail, and that created a panic that the system would lock up. So most were bailed out to preserve the integrity of the financial system. Whether that was the right choice is a matter of debate, but that’s what happened.

Financial regulation in 2010 sought to make this process a little easier if there was a next time. Agencies were given new powers they’re now getting around to figuring out how to use them.

One of the most powerful agencies is the FDIC, which insures the deposits of banks. If a bank runs out of cash to pay depositors, the FDIC comes in with fresh cash and takes over the bank. Their new system is a bit of corporate trickery, but I’m pretty sure you can keep up.

Most banks operate as holding companies. So a corporate entity owns a collective of businesses that look like one company to the customer. It’s the corporate entity the FDIC will take over. The individual businesses that aren’t broken will be allowed to continue to operate. This keeps the financial system intact. If those businesses need money, the FDIC is allowed to borrow funds from the Treasury.

Stockholders in the parent company will be given nothing. As per corporate law anyway, they should lose their money. Anyone that lent the bank money will exchange the debt for equity (ownership) in a new private company. Presumably, the new private company will include the functioning businesses, the sick businesses will be bankrupted.

This sounds relatively easy on paper, but in practice it could be a nightmare. In fact, some don’t think the FDIC could pull it off. Many expect it would be too hard and they’d just do another bailout. In the old style bailout the government will just lend the company the money directly and help them work through the issues. Stockholders will get hurt, but they may not be wiped out.

It is very complicated though. Stockholders in the failing company may fail themselves if the value of their stock goes to zero. A panic may still occur. But the goal of the new process is to keep the functional units functioning, therefore preserving the banking system. While the plan might not work, it’s better than not having a plan in place at all.

What regulators will have to keep in mind is that nothing ever goes to plan. The unexpected will occur and so they must be prepared to be flexible and adaptable. Hopefully, we’ll never need it.

Read: Avoiding the Next Big Bailout

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Six Things The Bachelorette Can Teach Us About Money

The Weakonomist — Tue, 15 May 2012 14:15:27 +0000

Being married to the fairer sex, one often finds themselves watching television shows that don’t normally show up on their radar in order to spend quality time with said partner. Funny, as when Star Wars comes on I find myself quickly alone in the room. Marriage is about sacrifices though and so last night I sat through 90 minutes of what I can only imagine the CIA refers to as water-boarding.

But that doesn’t mean I can’t exploit my discomfort to find some pop-culture references that can be tied into something for this blog. Usually, I prefer to do these lists with things I actually like (see below), but I can make an exception.

So what can a reality show that by its very nature defies the statistics behind matchmaking teach us about money? Just see:

If something is profitable, make more: And it doesn’t have to be good, it just has to make money. This is really what The Bachelor and The Bachelorette have always been about. Television and movie producers will happily take concept and run it into the ground. Not only have the original shows had many seasons, but offshoots of the concept like Joe Schmo, Joe Millionaire, and Flavor of Love and more have also had varying degrees of success. It doesn’t have to be good, it doesn’t even have to be a success based on the fake premise of one person finding love among dozens of members of the opposite sex. It just needs to be entertaining. This model isn’t limited to TV. We see this in toys, video games, and just about any form of entertainment because product and content executives really have no idea what will work until it’s in front of the people.

Nothing is safe, there are no guarantees: On The Bachelorette one beautiful woman is given 25 guys that will try to court her. Through a long and drawn out process of elimination she will get the group down to just one and then that one must choose to be with her or not. Many times the show ends with the two engaged or at least caught up in a fairy-tale style romance. The reality is that the couples don’t normally last. This is easily evidenced by the fact the current bachelorette won on the last bachelor and then they broke up. The same thing of course applies to our finances. No investment is perfectly safe. Any investment, even the cash in your bank account could go away. Most people assume their money is always safe because that’s how it’s pitched by bankers and investment advisors. Investments and cash are much safer than a relationship formed on a reality show, but by its very nature money is never safe. Even under your mattress.

There’s always enough idiots to fall for a scam: The financial crisis exposed Bernie Madoff’s ponzi scheme and since then government agencies have cracked down on dozens of other investment scams. But there will always be enough morons to fall for the next one. Just like there will always be enough potato-brained viewers to buy into the premise of The Bachelorette. Keep in mind, the premise is that 25 guys would all magically like the same girl and compete for her love. The only place that’s reality is China. But like an investment scam, to get viewers the show sells the idea that something that is too good to be true is actually true.

Stick with the boring options: Advisors and bankers commonly convince their clients to put their money in products they don’t understand. But they look interesting and have all the bells and whistles. On the show the best person for the man or woman is likely the most boring contestant. The one that doesn’t cause trouble and stays out of the way of the other suitors. The one that doesn’t do cheesy things to get attention of viewers or the opposite sex they’re courting. But those people aren’t entertaining, and don’t last long on the show. It was clear in the premier who the producers of the show like, and they will somehow last much longer than the view would expect because they’re fun to watch. Stick with boring investments that are easy to understand, they’re the only ones that will still be around when you’re old and grey.

Past performance is not an indication of future returns: We see this all the time on the documentation you receive about mutual funds. They must disclose this in the marketing materials because those materials contain nothing but carefully framed charts showing their past performance. It’s good they must disclose this. On The Bachelor this is not disclosed, but it is implied in the premise. The show’s track record for successful relationships is actually terrible. The simple fact that they bring back someone that was matched in a prior season is enough. This year the beauty has a kid too. I’m sure that kind of baggage will certainly get the guy to stick around after he wins.

People will do what their incentives tell them to do: On the show, every person has an incentive to win. Winning gets you celebrity status for at least a short time. If you can “win” you can parlay that into a career in Hollywood regardless of your relationship status. The winning couple can make quite a bit of money in endorsements and other celebrity related goodies. So is this really about love? Love of money perhaps. Pretending to love a pretty girl long enough to get there is a small price to pay. This is exactly the same problem we have everywhere in the world: politics, business, school, sports. People have various incentives and they may not be perfectly aligned with the intent of their position. This is why we are constantly disappointed but really shouldn’t be surprised when these people do something bad that lines their pockets.

There is much to learn in the world of television. Look all around you and try to learn lessons from other peoples mistakes.

Other “Six Things Can Teach Us About Money” Posts:
Star Wars
The Ferengi
James Bond
World Cup
March Madness

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Imagine A World…

The Weakonomist — Fri, 11 May 2012 13:59:07 +0000

Wall Street is all a-flutter right now because it’s earnings season. The term is a bit odd since earnings are reported 4 times a year. Every season is technically earnings season. But most companies do report their earnings over a stretch of a few weeks and so that is a hot time for the market.

Company earnings are the primary driver of a stock’s performance. If the earnings meet investor expectations, prices are more stable. But if they are much higher or lower, the stock can move a lot in a couple of days. To help avoid surprises, companies provide what’s called “guidance”. Guidance is the company’s best guess at what they think their earnings will be. An industry veteran debates whether or not companies should provide guidance here.

Guidance is one of many things that can influence stock markets. Stock markets are quite volatile, and some people’s careers can be made or broken in a matter of seconds. A headline alone can move a market into the red, even if the headline was published in error. Economic reports like unemployment or Gross Domestic Product can also shift markets in one direction or another.

With dozens and potentially hundreds of factors impacting the movement of the stock market, it’s a wonder anything ever gets sorted out. Trillions of shares, trillions of dollars, and split-second decisions; it’s enough to drive a trader to lunacy.

Imagine a world then that is much more stable. Instead of seeing an economic report every month, it comes out once a year. Instead of reporting earnings once a quarter, how about yearly? Maybe stocks even only traded for an hour a day, or for one day a month.

This is about giving people time to digest the news. Whatever it is, the news can lead to people making rash decisions. These decisions have to be made quickly or else you’ll miss out on whatever opportunity is there. If you couldn’t act on the news immediately, you might have time to really dig in deep and determine if it’s something worth acting on.

Behavioral economics has already taught us that we don’t make good decisions when faced with lots of choices. It would be interesting to know if we make the right decision if we have to act that second compared to being given 5 minutes, or 5 days to really mull it over.

This is all flies in the face of the advantages of the stock market as it is today. News is digested quickly. The market is considered efficient. It’s liquid. These are all true things. But fear and panic made the financial crisis worse than it had to be. It’s at least food for thought. What would the world look like if markets were given more time to make decisions?

Image: Alex E. Proimos

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Why Does The Stock Market Close For Good Friday?

The Weakonomist — Fri, 06 Apr 2012 14:23:58 +0000

Today is Good Friday and for those not of the Christian faith this is the day that Jesus died. Easter Sunday is when he is celebrated for rising from the dead. To Christians Easter is a pretty big holiday. To the rest of the world, including the retail sector, it’s a ‘meh’ kind of holiday.

Good Friday isn’t a federal holiday and most every business is open today. So why is the stock market closed?

The truth is out there, but it is not well known. So not known that a few queries to folks closer to Wall Street than I am either went unanswered or came back with best guesses or just “I don’t know”.

One of the most plausible answers is because Good Friday is a holiday all over Europe as well. Stock exchanges are closed there and that affects the volume of transactions in the US. Without much going on in Europe, the US could take the day off too. But this one doesn’t add up to me.

In the US our markets close on days like Washington’s birthday, Independence Day, and Labor Day. These are holidays not celebrated in Europe. Europe has their own holiday schedule that doesn’t line up with ours either. For instance, the London Stock Exchange is closed on Monday to celebrate Easter. The NYSE is not. Holiday synching doesn’t seem like a good answer.

It could be tradition. The NYSE is very traditional; they refer to Presidents’ Day as Washington’s birthday instead. They’ve taken almost every Good Friday off since the 19th century and it’s likely a lot more people celebrated Easter back then.

One of the most interesting theories goes to the NYSE building itself. The NYSE may not own their building and the lessor is very conservative. So the leasing contract requires all businesses be closed on Good Friday for Easter. I couldn’t confirm who owns the NYSE buildings, but if Chick Fil A is closed on Sundays, it might fit.

There are other theories as well, but they all tie back to weak trading volume on the day so the exchange just closes every year.

None of these ideas are so well grounded that they deserve a citation. The truth seems to be, that if there ever was a reason to close the exchange on Good Friday, no one remembers it.

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Put Your Money Where Your Mouth Is?

The Weakonomist — Thu, 05 Apr 2012 14:03:07 +0000

T. Boone Pickens is a well known billionaire that for the most part has made his money investing in energy businesses. Today he runs a hedge fund but previously made his billions during the buyout craze of the 1980s.

For some he’s known as the loony old guy behind the “Pickens Plan” commercials that ran a few years ago. The Pickens Plan is a proposal to get Americans off of imported oil and onto green sources of energy as well as using the existing resources available in the US. Namely: natural gas.

That’s all well and good. In principle it’s something most of us could get behind if you exclude the current issues behind natural gas.

Pickens is truly a believer of man-made global warming. He’s also concerned with sending money from the United States to OPEC countries. So his plan is designed to get us off that oil and onto green tech and natural gas.

It’s no surprise then that on CNBC this week Pickens said he would expect to see oil back near $150 a barrel in the summer. Not something most of us want to hear. But given his support for green energy and natural gas he has staked his reputation on this plan and so has an incentive to scare us about oil. Whether he is right or not is almost irrelevant.

Many would say he should put his money where his mouth is. If he wants to make this happen and thinks it will then he should put some money on the table. He has. He’s invested in companies that pull gas out of the ground and even in firms that make natural gas engines for big vehicles like buses and dump trucks. He’s lobbying Congress like crazy for regulations that encourage more use of natural gas. This can happen in the form of tax credits or even regulation of electricity generation. He stands to make a boatload of cash if the US moves to natural gas.

And that’s a catch 22.

Skeptics would tell anyone with a cause to put their money where the mouths are. Think about the Super Bowl. If I think the Giants are going to beat the Patriots someone who thinks otherwise would tell me to make a bet. And I could. But then I not only think something will happen, I have an incentive to make it happen. Perhaps a $100 bet doesn’t make it worth the effort, but a $1 billion might make it worth my time to break Tom Brady’s legs.

Thinking about incentives gives you a cynical view of the world. And it’s something I wrestle with all the time. So is Boone Pickens just a cheerleader for a cause that will make him rich or does he really believe in this and so put his money down as proof? Can someone put money down on a bet and still seem sincere about the outcome?

Photo: Center for American Progress Action Fund

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Weak Links: Less Roads, Less Traffic?

weakonom — Fri, 23 Mar 2012 14:21:09 +0000

Why I gave up my six-figure salary and quit Bay Street: Bay Street is in Toronto and is Canada’s version of Wall Street. You can’t expect much a difference between the two countries, but this author provides a well written explanation of his time in finance and why he, and others, left.

Remove the highways, fix the traffic problem: One of the most interesting reads in 2012 so far. John Norquist championed the destruction of some highways in Milwaukee while the mayor and actually saw an improvement in traffic. New Urbanism is the name of the idea and it calls for better city planning that reduces congestion. The best way to sum it up is that by proper planning of roads, people won’t have an incentive to live far out of town and commute in for things they need. If you work in the city, live in the city. We are likely to see this in some form or another in increasingly greater amounts all over the country as the cost of commuting continues to rise. Most traffic issues are “solved” by adding supply to support the increased demand. What would happy to demand if supply was taken away? I’d like to see how they would do DC though.

Castro might have known Kennedy was going to get shot: Conspiracy theorists rejoice. A great conspiracy about Fidel Castro knowing JFK was going to get shot. The only downside is if this story is true, most of the cover-up conspiracies likely wouldn’t be.

Generally speaking, everything makes you fat: Extensive article showing that calories alone can’t account for the reason everyone is so fat. It’s the quality of what is put into our body. The whole article reads like an endorsement for organic food, and it will give the overweight among us an excuse for not jogging tomorrow. Mommy’s eating when she was pregnant made me fat.

Men, just thinking about talking to women makes you dumber: This would explain while I fumble through my words every time I need to talk to my wife about something. Points scored for The Weakonomist (if The Sheconomist is reading)!

Number cruncher’s life in charts: I didn’t build this, but I feel a good connection to the charts. Especially aligning the supposed same data from different sources.

Are you a ginger? You can take the pain: Red heads feel less pain than everyone else. Are they more genetically advanced? Will they rule the world? Thank a ginger today.

Divorce: the downside to living longer: Til death do us part used to mean 60 years. Now 90 isn’t crazy. The rate of divorce of people over 50 has doubled over the last 20 years. When the kids are gone, it usually meant you were about to die. Now it means you have to decide if you want to spend another 50 years with the other parent. Many are thinking, not. Via @pkedrosky

More People Interested in Part-Time Retirement: Count me as one of them. Weakonomics started because at the time I was bored working just 40 hours a week. I work more now, but I can’t imagine full blown retirement. Not yet at least.

Tricks retailers use to carve out extra profits: Candy bars have been shrinking, but the prices for them haven’t. That’s good for bellies, and retailers. This is just one of a number of ways retailers are playing games with price tags these days.

Once again, I entered a post into the Carnival of Personal Finance. Once again, I was editor’s choice. Click through to see what it was.

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Charts Tell A Story

The Weakonomist — Fri, 16 Mar 2012 14:39:48 +0000

Whatever story you want to tell, you can make a chart that tells it. We see this all the time in politics, but anyone can use a chart to make a point. Earlier this week Bruce Krasting of Business Insider used the following chart as a part of a long-winded way of saying stocks are either going to fall or interest rates will rise:

Basically, this chart is saying that China has had to sell some of their holdings of US debt to pay for their oil imports. And if the Chinese aren’t buying our government debt and no one else will then interest rates are going to have to go up. Bruce outlines his reasoning for why others aren’t going to buy the debt. Fair enough.

But look at the chart closely, do you see anything weird? Maybe two things weird?

The chart seems to be going backwards through time. It starts with a peak in July and then goes back to January. This implies that Chinese borrowing has never been higher. And unless my arithmetic is off I think that’s closer to a change of $160 billion, not 260. Bruce left off some of the chart.

This shows the falloff Bruce probably meant to illustrate. But all I’m seeing is a huge increase in debt buying last June and then a reversion to the mean. January’s numbers indicate a pickup in Chinese lending has resumed, despite the rise in oil prices.

But, for the sake of argument let’s assume Bruce is right and China has been selling off their US debt holdings to pay for gas. Bruce’s other assumption was that no one else has the money to lend and so Federal interest rates have to go up. Well, let’s see if everyone has taken a step back in their purchases of US debt like the Chinese have.

Hmmm. I thought no one had the money to keep buying US debt? But China is so big their small percentage decrease offsets everything else right?

Hmmm. It looks like Japan has upped their game recently. It couldn’t have been that when one buyer exits a market a small price change could tempt another buyer into the market right? No. That doesn’t happen.

But let’s ignore even that. Let’s assume everything Bruce has said is right. Let’s look at his headline: Either Stocks Will Fall Or The Ten-Year Is Headed To 3%

The ten year is currently at around 2.3% has been around 2% for some time. My audience won’t necessarily see anything Bruce’s prediction. But please know this is a statement as obvious as a presidential candidate’s pandering.

If stocks go up, it’s usually a sign of an improving economy. If the economy improves then the Fed will allow interest rates to rise. If the economy doesn’t rise, then stocks will fall and the Fed will keep interest rates low. This headline might have well just said “I’m either going to eat supper or dinner tonight”.

Know that my charts may be no more right or wrong than Bruce’s. All charts tell the story the creator wants to tell. Just be wary, and make sure you understand all the circumstances that influence the chart before drawing any conclusions.

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The One Percent Index

The Weakonomist — Mon, 05 Mar 2012 15:35:33 +0000

There’s a lot of talk out there about the vanishing middle class. The rich get richer, the poor get poorer, and the middle class is slowly eroding away. No end seems to be in sight either so the problem may continue to get worse. Most of the talk seems to be complaining, but that tells me many may be missing a business opportunity.

Even assuming the rich get so rich the middle class all but disappears, there will still need to be companies that cater to the rich. They may not spend all their money, but they spend more than you or I could ever hope to. So why not start a company that caters to the rich. And if you aren’t business savvy perhaps you can invest in some companies that already do. I’ve taken the liberty of creating a list of such companies. Perhaps an enterprising ETF firm or investment company would put together such an index so we could track it.

Until then though, take a look at some of the companies that cater to the 1%, it’s hard to believe the rich would get richer and these companies not get more and more profitable. Enjoy:

LVMH Moët Hennessy • Louis Vuitton S.A: French conglomerate that owns Louis Vuitton, Marc Jacobs, Fendi, TAG Heuer, and Dior cosmetics.
Christian Dior S.A.: Owns 42% of the above company and Christian Dior brands and stores.
PPR: Gucci and Yves Saint Laurent, among others.
Coach, Inc: Leather goods and most recognized for purses.
BMW AG: In addition to its namesake brand, they also own Rolls Royce.
Volkswagen Group: Owners of Audi, Lamborghini, Bentley and Bugatti.
UBS: Largest wealth manager in the world and also a Swiss bank.
Goldman Sachs: Like UBS, but more diversified and a better brand in the states.
Starwood Hotels: Owners of many luxury hotels.
Ralph Lauren Corporation: $80 for a polo shirt is just the beginning.
Apple: As high end as you can get with consumer electronics.
Macy’s: Owns Bloomingdale’s
Nordstrom: Best return policy in upscale department stores.
Starbucks: Still the best accessory in snacks.
Toll Brothers: Largest luxury home-builder.
Costco: Everybody has to get toilet paper, and Costco has the best locations in the business.
American Express: Best brand in plastic.
Newmont Mining: Big player in gold mining.
Nike: Rich people got to have athletic clothes too. They also own Cole Haan.
Sotheby’s: Auction house and world’s largest art dealer.
Williams Sonoma: Not just high end kitchen supplies, they also have Pottery Barn.
Wynn Resorts: Big player in luxury hotels and casinos.
Tiffany & Co: Blue box or nothing to these people.
Whole Foods: The closest thing to a luxury grocer that you can invest in.
Textron: Need to buy a private jet or helicopter? Place your order with Cessna or Bell, both owned by Textron.

These next ones are not necessarily 1% companies, but they can move into any market and have exposure to the group:

Blackstone: A private equity company that owns the Hilton hotel group. Being a private equity firm, they take money from wealthy investors and buy private companies for handsome returns. If you can’t invest like the wealthy, you can at least invest in the company that invests money for wealthy people.
Carlyle Group: They are like Blackstone, and will go public soon.
Berkshire Hathaway: Warren Buffett’s company owns NetJets, which provides fractional ownership in jets. They also own some specialty insurance companies that cater to the wealthy, some jewelry stores, and have the ability to buy up any up and coming company that caters to a 1% that continues to get richer.
General Electric: There isn’t a market GE isn’t in. They not only make things that all these other companies listed use, they can buy emerging companies that are in new markets and manipulate governments to keep their shareholders happy.
Samsung: Samsung doesn’t just make consumer electronics, many of which are high-end enough to alone be on this list. But they are also a conglomerate and that makes them a cross between Apple and GE.
Tata: The GE of India, also owns Jaguar and Land Rover.

This list is by no means complete. But I have to thank The Sheconomist for her help, especially with many of the French brands. Please use the comments to add to the list. They need to be publicly traded companies and of reasonable size, otherwise such an index wouldn’t work. I’ll add thoughts to your suggestions.

Image: Clemson

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Finally An Explanation For Trusts

The Weakonomist — Fri, 02 Mar 2012 16:06:35 +0000

Since I first started learning about personal finance there have been some areas where I’ve struggled to develop a full understanding. Most of them are centered around insurance and taxes. I’m still not very good with insurance, but I’m getting better with the tax stuff.

One area of taxing and wealth management that has always been confusing has been the matter of trusts. You’ve heard of trust funds and trust babies and that helps many people understand basically that trusts are types of accounts for wealthy people.

But the wealth management business is full of needlessly complicated banking, insurance, and investment products. So were trusts needlessly complicated accounts for rich people too?

The answer is yes, but also no. The current system of trusts is way too complicated, but I got some insight from someone in the business recently that made it clear. There are only two reasons for a trust:

Reason 1: You’ve got a lot of money and you want to be very specific about who gets what (and when). It’s not just money, but assets, ownership of private companies, real estate, you name it. And no one can manage it like you can so if you die you want very explicit instructions for how its handled. You put those assets in a trust.

The best example is between parents and kids. Say the parents are wealthy and worry they might die before the kids grow up. Splitting up the money into trusts not only allocates it ahead of time, but the trust can also stipulate when the children get the money. Maybe it’s a lump some at 18, or trickles out over time to support life stages. When you think of a trust fund baby, this is what it is. Another example might be a wealthy husband making a trust for his second wife independent of what his children get when he dies. And it’s set up to give her $10,000 a month until its depleted or she dies at which time the balance is perhaps donated to a charity.

Reason 2: Taxes. That’s it. Just taxes. Putting money and assets into trusts avoids the estate tax. Not every trust works this way, and it may not always work. But a trust banker worth even half their pay can take your $20 million and make sure the government doesn’t get $5.2 million of that when you die and it goes to your kids. The estate tax is much more generous to the wealthy today than it has ever been, giving the wealthy less need to put all their money in trusts. SmartMoney has a fun calculator to see how much they take. To keep things simple just use the cash and taxable investments box.

That’s really the only reason for a trust. Either you want to be explicit about what happens to your stuff when you die, or you want to keep the government from getting their hands on it. There are other reasons and an estate planner can share many, but they wouldn’t bother unless the benefits were traced back to one of these things.

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We Prefer Being Forced To Save

The Weakonomist — Wed, 08 Feb 2012 15:13:57 +0000

A new study says that a significant majority of people would be fine to have their employers temporarily increase the amount the employee contributes to retirement plans up to 10%. I would certainly fall into that category myself as most of you likely would too.

But isn’t that sad? Why don’t people just temporarily increase it themselves? Or permanently if they can afford it. I think most people with disposable incomes don’t have a problem paying for necessary expenses but they don’t want to put an extra dime into something that is mentally considered discretionary. If employers forcefully increase contribution amounts it would fall into that “necessary expense” category. I’m all for giving people the freedom of choice, but I think the automatic option when you start work is 10% going to retirement accounts.

It shouldn’t be the case that employers play any part in our savings. But even today some employers are the sole providers of retirement savings for their employees with pensions. That’s going the way of the dinosaur, but we’re still in a transition phase, which is what the 401k is all about. It’s possible in the future that employers won’t provide any benefits. But if they continue to do so it’s because the labor market demands it.

And as long as the labor market demands it, we should want those employers to help us make the best choices possible. It’s certainly clear that we aren’t good at making decisions on our own.

Making things easier

If you look at the current system for retirement plans out there, it’s clear not enough has been done to make things easy for the consumer. Most of the people working today at least grew up expecting a pension. The first generation of people that only knows 401ks and IRAs is only in the first shift of their careers. Everyone else (and many young people too) are daunted and confused by all the options available to them.

My employer has, in an attempt to make things easier, has made things harder. Going through the systems at work to check the information of my retirement account takes 5 minutes and at least 2 different log ins. Even after that I’m faced with a website that is difficult for even me to read. I can barely tell the difference between my 401k and the token pension based on the titles of the accounts. Nothing is customizable and nothing is easy to follow.

I used to think that idiots deserve what they get but in the last few years have started to fall in line of at least helping people make the proper decisions. For instance, I know nothing about healthcare and health insurance and would love for all of it to be easier for my monkey brain to make the right decisions. I’d rather not have to pay a stupid tax when it comes to health care.

Employers can do a number of things in addition to automatically enrolling employees and increasing their contributions amounts. They can make the websites easy to understand and be proactive about forcing the providers of the plans to make things less complicated. Even something so simple as having the retirement account website automatically bookmarked on work computers could go a long way.

Read: We Have Ways of Making You Save More (WSJ)

Image: 401K

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