Simplification and Saving

John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian

NBER Working Paper No. 12659
Issued in October 2006
NBER Program(s):Economics of Aging, Labor Studies, Public Economics

The daunting complexity of important financial decisions can lead to procrastination. We evaluate a low-cost intervention that substantially simplifies the retirement savings plan participation decision. Individuals received an opportunity to enroll in a retirement savings plan at a pre-selected contribution rate and asset allocation, allowing them to collapse a multidimensional problem into a binary choice between the status quo and the pre-selected alternative. The intervention increases plan enrollment rates by 10 to 20 percentage points. We find that a similar intervention can be used to increase contribution rates among employees who are already participating in a savings plan.

A non-technical summary of this paper is available in the May 2007 NBER Digest.  You can sign up to receive the NBER Digest by email.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w12659

Published: Beshears, John & Choi, James J. & Laibson, David & Madrian, Brigitte C., 2013. "Simplification and saving," Journal of Economic Behavior & Organization, Elsevier, vol. 95(C), pages 130-145. citation courtesy of