Behavioral Finance and the Roth 401(k) - Dec. 19 - 2005

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"Behavioral Finance" Provides Another Reason to Consider the Roth 401(k) Option

December 19, 2005
ERISA Expertise LLC


"Behavioral Finance or Behavioral Economics" is another reason why the Roth 401(k)/403(b) should be considered by plan participants regardless of their income level. Here's what Wikipedia, the free encyclopedia, has to say about these relatively new fields of study:

"Behavioral finance and behavioral economics are closely related fields which apply scientific research on human and social cognitive and emotional biases to better understand economic decisions and how they affect market prices, returns and the allocation of resources. The fields are primarily concerned with the rationality, or lack thereof, of economic agents. Behavioral models typically integrate insights from psychology with neo-classical economic theory." Learn more

These fields of study advance the theory that many of us spend available cash frivolously in lieu of saving. Think "buy term insurance and invest the difference." How many of us invest the money we save?

How does this apply to the new Roth 401(k) option?

ENTIRE ARTICLE HERE