How Much to Save? Decision Costs and Retirement Plan Participation

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 deci...

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Bibliographic Details
Published inIDEAS Working Paper Series from RePEc
Main Authors Goldin, Jacob, Homonoff, Tatiana, Patterson, Richard W, Skimmyhorn, William L
Format Paper
LanguageEnglish
Published St. Louis Federal Reserve Bank of St. Louis 01.01.2020
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Summary: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.