How Much to Save? Decision Costs and Retirement Plan Participation

43 Pages Posted: 28 Jul 2020 Last revised: 7 May 2021

See all articles by Jacob Goldin

Jacob Goldin

Stanford Law School

Tatiana Alexandra Homonoff

Cornell University; Cornell University; New York University (NYU) - Robert F. Wagner Graduate School of Public Service

Richard Patterson

United States Military Academy; Cornell University - Department of Policy Analysis and Management

Bill Skimmyhorn

Mason School of Business, College of William & Mary; U.S. Army Office of Economic and Manpower Analysis

Date Written: July 2020

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.

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Suggested Citation

Goldin, Jacob and Homonoff, Tatiana Alexandra and Patterson, Richard and Skimmyhorn, William, How Much to Save? Decision Costs and Retirement Plan Participation (July 2020). NBER Working Paper No. w27575, Available at SSRN: https://ssrn.com/abstract=3661068

Jacob Goldin (Contact Author)

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States

Tatiana Alexandra Homonoff

Cornell University ( email )

Ithaca, NY
United States

Cornell University ( email )

Policy Analysis and Management
134, Martha Van Rensselar Hall
Ithaca, NY 14850
United States

HOME PAGE: http://www.human.cornell.edu/bio.cfm?netid=tah96

New York University (NYU) - Robert F. Wagner Graduate School of Public Service ( email )

The Puck Building
295 Lafayette Street, Second Floor
New York, NY 10012
United States

Richard Patterson

United States Military Academy ( email )

600 Thayer Rd
West Point, NY 10996
United States
(435) 640-9054 (Phone)

Cornell University - Department of Policy Analysis and Management ( email )

Ithaca, NY
United States
(435) 640-9054 (Phone)

HOME PAGE: http://https://sites.google.com/site/richpattersoncornell/

William Skimmyhorn

Mason School of Business, College of William & Mary ( email )

Williamsburg, VA
United States

HOME PAGE: http://https://mason.wm.edu/faculty/directory/full-time-faculty/skimmyhorn_w.php

U.S. Army Office of Economic and Manpower Analysis ( email )

West Point, NY
United States

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