Save More Tomorrow

What It Means

Save More Tomorrow is a retirement savings program designed by economists Richard Thaler and Shlomo Benartzi. Instead of asking people to save more out of today's pay, it asks them to commit now to raising their contribution rate each time they get a raise. The increases continue with each raise until the rate reaches a preset maximum, so savings grow while take-home payTake-home payThe money that actually reaches you from a paycheck after taxes and other deductions are taken out, also called net pay or net income. See more doesn't have to shrink.

How People Say It

• "I signed up to bump my 401(k) every time I get a raise."
• "I won't miss money I never had."
• "My contribution goes up 1% every January."

The Breakdown

Worked example. Tomas earns $50,000 and saves 3.5% in his 401(k)401(k)A retirement plan run through an employer that lets you put part of each paycheck into investments, before tax or as Roth, up to a yearly IRS limit. See more. He joins a Save More Tomorrow plan that adds 3 points at each yearly raise of 3.5%, up to 15% (all example figures).

What the result means. Tomas's savings rateSavings rateThe share of your income you save, found by dividing what you saved in a period by what you earned in that same period. See more more than quadruples in four years, and the money left after his contribution still edges up each year, because each increase comes out of a raise. When the raise is smaller than the step, pay after contribution can dip; pick a step that fits your raises.

Short version to try today. Decide the rate you'd like to reach, then write down how many points you'll add at each raise to get there.

Where It Comes From

Richard Thaler, of the University of Chicago, and Shlomo Benartzi, of UCLA Anderson, described the program in "Save More Tomorrow: Using Behavioral Economics to Increase Employee Saving," published in the JournalJournalingWriting down your thoughts and feelings, in a notebook or an app, to understand them more clearly and to see what's behind your stress. See more of Political Economy in 2004. In its first use, 78% of the employees offered the plan joined, 80% of those stayed in through the fourth raise, and participants' average saving rate rose from 3.5% to 13.6% over 40 months.

Good to Know

The design comes from Thaler and Benartzi's paper: people were approached about three months before a scheduled raise, and each increase began with the first paycheck after it. You can copy the idea on your own by changing your contribution rate after each raise, or ask your employer whether the plan can raise it automatically on a schedule. Check the 401(k) limit for the year before setting a high target, since the IRS caps what you can put in.

Related Terms and Categories

• Savings rate

  The share of your income you save, found by dividing what you saved in a period by what you earned in that same period.

• Pay yourself first

  Moving a set amount into savings as soon as you're paid, before bills or spending, so saving comes first instead of from what's left.

• Automatic savings

  Saving that happens on a schedule without a decision each time, through a split direct deposit or a recurring transfer from checking to savings.

• Lifestyle creep

  When spending rises along with income, so a raise or a new job leads to a bigger lifestyle but little or no extra saving.

• 401(k)

  A retirement plan run through an employer that lets you put part of each paycheck into investments, before tax or as Roth, up to a yearly IRS limit.

• Asking for a raise

  Requesting higher pay from your current employer, usually backed by your results, your role's market pay and what you plan to take on next.

Saving and investing basics