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How much to save? Decision costs and retirement plan participation

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  • Goldin, Jacob
  • Homonoff, Tatiana
  • Patterson, Richard
  • Skimmyhorn, William

Abstract

Deciding how much to save for retirement can be complicated. Drawing on a field experiment conducted with the Department of Defense, we study whether such complexity depresses participation in an employer-sponsored retirement saving plan. We find that simplifying one dimension of the enrollment decision, by highlighting a potential rate at which non-participants might contribute, increases participation in the plan. Similar communications that did not include a highlighted rate yield smaller effects. The results highlight how reducing complexity on the intensive margin of a decision (how much to contribute) can affect extensive margin behavior (whether to contribute at all) in a setting of policy interest.

Suggested Citation

  • Goldin, Jacob & Homonoff, Tatiana & Patterson, Richard & Skimmyhorn, William, 2020. "How much to save? Decision costs and retirement plan participation," Journal of Public Economics, Elsevier, vol. 191(C).
    • Handle: RePEc:eee:pubeco:v:191:y:2020:i:c:s0047272720301110
    DOI: 10.1016/j.jpubeco.2020.104247
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    Cited by:

    1. Rob Bauer & Inka Eberhardt & Paul Smeets, 2022. "A Fistful of Dollars: Financial Incentives, Peer Information, and Retirement Savings," The Review of Financial Studies, Society for Financial Studies, vol. 35(6), pages 2981-3020.
    2. Dur, Robert & Fleming, Dimitry & van Garderen, Marten & van Lent, Max, 2021. "A social norm nudge to save more: A field experiment at a retail bank," Journal of Public Economics, Elsevier, vol. 200(C).
    3. Bucher-Koenen, Tabea & Knebel, Caroline & Weber, Martin, 2023. "Do individuals accept fluctuations in pension income?," ZEW Discussion Papers 23-019, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    Keywords

    Retirement savings; Complexity; Nudges; Decision costs; Household finance;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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