Save More Tomorrow
Commit part of each future raise to higher retirement savings
- Difficulty
- Easy
- Time to result
- ~months to results
- Steps
- 5
- Confidence
- 99%
Save More Tomorrow is a prospective commitment strategy that links retirement contribution increases to future pay raises. Instead of asking someone to accept an immediate reduction in take-home pay, the plan secures agreement today to save more when income rises later. Automation then implements the increase at each raise, overcoming procrastination and inertia. Because only part of the raise is redirected, the participant can usually save more while still experiencing higher take-home pay. Repetition compounds the effect as successive raises produce successive contribution increases. The framework applies behavioral economics to self-control: it shifts a painful present sacrifice into a less threatening future commitment and makes continued participation the path of least resistance.
Origin
Extracted from Masters in Business, where Richard Thaler identifies Save More Tomorrow as one of two small changes that transformed many 401(k) plans.
Core principles
- 01Make the commitment before additional income arrives
- 02Increase savings when income rises rather than cutting current pay
- 03Use automation to overcome inertia
- 04Preserve the participant's ability to decline
- 05Turn repeated raises into repeated contribution increases
How to run it
- 1
Set the baseline
Record the participant's current contribution rate and ensure immediate financial obligations are manageable.
Pro tip Pair the baseline review with any available employer match.
Watch out Do not increase retirement saving at the expense of essential bills or minimum debt payments.
- 2
Make the advance commitment
Ask the participant to agree now that future raises will trigger higher contribution rates.
Pro tip Frame the commitment as sharing each raise between present income and future security.
Watch out A vague intention without an explicit trigger is easy to abandon.
- 3
Choose the escalation rule
Specify how much the contribution rate will rise with each pay increase and where the escalation will stop.
Pro tip Use a modest increment that still leaves the participant with a noticeable increase in take-home pay.
Watch out An aggressive escalation can cause participants to opt out entirely.
- 4
Automate the change
Configure payroll or recurring transfers so each qualifying raise activates the planned increase without another decision.
Pro tip Notify participants before and after each adjustment.
Watch out Manual implementation reintroduces procrastination.
- 5
Review and maintain
Periodically assess affordability, plan limits, and progress toward the retirement target while retaining an opt-out.
Pro tip Review after major life changes rather than reacting to ordinary market volatility.
Watch out Do not treat the default trajectory as suitable forever.
In the wild
An employee contributing 4% agrees that every annual raise will add one percentage point to the retirement contribution rate until it reaches 10%. Payroll applies each increase automatically, while the remainder of every raise still increases take-home pay.
→ The employee gradually reaches a materially higher savings rate without facing one large immediate sacrifice.
Common mistakes
Demanding the full increase now
An immediate reduction in take-home pay makes loss aversion and resistance more salient than a future commitment does.
Leaving increases manual
Requiring a new action after every raise allows inertia and procrastination to interrupt the plan.
Ignoring affordability
Escalation should stop or pause when essential expenses, debt, or income instability make additional saving impractical.
Is it for you?
Best for
It is best for employees with periodic pay increases who want to save more but struggle to act immediately.
Not ideal for
It is not ideal for people with unstable income, urgent high-interest debt, or no financial margin after essential expenses.
From the transcript
“The other one is what I call save more tomorrow, which is get people to agree to increase their saving rates every time they get…”
“and that has an impact and therefore they're contributing more.”
From the episode
Professor Richard Thaler: Masters in Business (Audio)