I spend a lot of time thinking about why people don't save more for retirement.
The usual answers are familiar.
Increase the company match.
Add automatic enrollment.
Improve financial education.
Make saving easier.
All of those can help.
But lately I have been wondering whether we sometimes start the conversation too far downstream.
What if the problem isn't that people don't understand the importance of saving?
What if they simply don't have enough money left to save?
That question led me to Denmark.
Not because Denmark provides a blueprint for the United States. It doesn't.
But Denmark has made very different choices about expenses that consume a household's income before retirement saving ever enters the picture.
Take healthcare.
Denmark provides universal coverage for a core set of healthcare services. According to the OECD, 83% of healthcare spending is covered through mandatory prepayment.
And Denmark isn't simply spending enormous amounts of money to accomplish this.
Healthcare spending is about 9.4% of Danish GDP, roughly in line with the OECD average.
The United States is a different story.
In 2024, U.S. healthcare spending exceeded $14,880 per person after adjusting for differences in purchasing power — the highest in the OECD and approximately 2½ times the OECD average.
Then there is childcare.
Every Danish child from about six months old until school age is entitled to subsidized daycare. Government covers at least 75% of the operating cost, leaving parents responsible for no more than 25%. Lower-income households can pay considerably less or nothing.
Again, that isn't free childcare.
Someone is paying for it.
Denmark has simply decided that taxpayers will collectively bear much of the cost rather than placing the entire expense on a family during the years when parents are also trying to build careers, buy homes and begin saving.
Higher education follows a similar model. Danish and qualifying European students generally can attend public universities without tuition, and eligible students may receive government support toward living expenses.
And then there is retirement itself.
Denmark doesn't rely on one program.
Its retirement system combines a public pension with mandatory and employment-based retirement arrangements. According to the OECD's 2025 pension analysis, a Danish worker earning an average wage over a full career is projected to replace at least 70% of pre-retirement earnings through mandatory retirement programs.
Of course, all of this costs money.
Denmark has one of the highest tax burdens among developed countries.
Which raises what I think is the more interesting question:
Should we judge a system by how much it collects — or by what it produces?
One place to look is poverty.
Using the same OECD definition for both countries, 6.3% of Denmark's population lived on less than half of median disposable household income in 2022.
In the United States, it was 18%.
Income inequality was also substantially lower. Denmark's Gini coefficient was 0.276 compared with 0.395 in the United States.
These numbers don't prove that Denmark's taxes caused its lower poverty rate.
Denmark and the United States are very different countries. They differ in population, demographics, labor markets, political institutions and countless other ways.
Nor has Denmark eliminated poverty or household financial pressure.
It hasn't.
But the results make it difficult to evaluate Denmark simply by pointing to its tax rate.
If we are going to count what Danes pay into the system, shouldn't we also count what comes out?
Healthcare.
Childcare.
Education.
Retirement income.
And, ultimately, substantially lower levels of relative poverty and income inequality.
That brings me back to the 401(k).
We spend an extraordinary amount of effort trying to persuade employees to save.
MIT's Living Wage Calculator illustrates the problem nicely. Its calculation begins with basic household expenses such as housing, food, healthcare, childcare and transportation.
Retirement savings aren't among those basic expenses.
That makes sense.
Before someone can save for life 30 years from now, they have to pay for life this month.
This is where retirement plan design eventually runs into household economics.
Suppose an employee receives a better company match.
That improves the incentive to contribute.
But the match doesn't lower the rent.
It doesn't pay the daycare bill.
It doesn't eliminate a health insurance deductible.
It doesn't make groceries cheaper.
A better match changes the reward for saving.
It doesn't necessarily create the money required to save in the first place.
This doesn't mean retirement plan design is unimportant.
Automatic enrollment works. Employer contributions matter. Education matters.
But there is a limit to what any of them can accomplish when there isn't enough money left at the end of the month.
Perhaps retirement security doesn't begin at age 65.
Maybe it doesn't even begin with the 401(k).
Maybe it begins with whether someone has enough financial room at age 30, 40 or 50 to put money aside at all.
The Parting Glass
There is an understandable temptation to look at Denmark's tax burden and stop there.
But that tells us what went into the system.
It doesn't tell us what came out.
Denmark has chosen to pay collectively for more healthcare, childcare, education and retirement security. On comparable OECD measures, it also has substantially less relative poverty and income inequality than the United States.
That doesn't prove America should adopt Denmark's system.
And it certainly doesn't prove that higher taxes automatically produce better outcomes.
It suggests something much simpler.
Judge the system by its outcomes, not merely its tax rate.
The same principle applies to retirement plans.
We can design a 401(k) with an excellent match.
We can automatically enroll employees.
We can provide calculators, seminars, websites, videos and financial education.
And we should.
But none of those things change a basic equation:
Income – current expenses = what is available for the future.
Before asking why an employee isn't saving enough, perhaps we should ask a more fundamental question:
After paying for a reasonable standard of living today, how much money do they actually have left to save for tomorrow?
If the answer is nothing, changing the match formula may not solve the problem.
It may simply be solving the wrong problem.
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