Working Paper: NBER ID: w11979
Authors: James J. Choi; David Laibson; Brigitte C. Madrian
Abstract: The complexity of the retirement savings decision may overwhelm employees, encouraging procrastination and reducing 401(k) enrollment rates. We study a low-cost manipulation designed to simplify the 401(k) enrollment process. Employees are given the option to make a Quick Enrollment(TM) election to enroll in their 401(k) plan at a pre-selected contribution rate and asset allocation. By decoupling the participation decision from the savings rate and asset allocation decisions, the Quick Enrollment(TM) mechanism simplifies the savings plan decision process. We find that at one company, Quick Enrollment(TM) tripled 401(k) participation rates among new employees three months after hire. When Quick Enrollment(TM) was offered to previously hired non-participating employees at two firms, participation increased by 10 to 20 percentage points among those employees affected.
Keywords: 401k; retirement savings; quick enrollment; participation rates
JEL Codes: D0; E21; G23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| quick enrollment (L26) | decision-making complexity (D91) |
| quick enrollment (L26) | 401k participation rates (D14) |
| quick enrollment (L26) | participation rates among new employees (J22) |
| quick enrollment (L26) | participation rates of previously hired non-participating employees (J63) |
| quick enrollment (L26) | asset allocation and contribution rates (G11) |