Working Paper: NBER ID: w28469
Authors: John Chalmers; Olivia S. Mitchell; Jonathan Reuter; Mingli Zhong
Abstract: Oregon recently launched an automatic-enrollment retirement savings program for private sector workers lacking access to other workplace retirement plans. We analyze participation choices, account balances, and inflow/outflow data using administrative records between August 2018 and April 2020. Within the small to mid-sized firms served by OregonSaves, estimated average after-tax earnings are low ($2,365 per month) and turnover rates are high (38.2% per year). Younger employees and employees in larger firms are less likely to opt out, but participation rates fall over time. The most common reason given for opting out is “I can’t afford to save at this time,” but the second most common is “I have my own retirement plan.” As of April 2020, 67,731 accounts had positive account balances, holding $51.1 million in total assets. The average balance is $754, but with considerable dispersion; younger workers accumulating the fewest assets due to higher job turnover. Overall, we conclude that OregonSaves has meaningfully increased employee savings by reducing search costs. The 34.3% of workers with positive account balances in April 2020 is comparable to the marginal increase in participation at larger firms in the private sector. Employees opting out of OregonSaves are often doing so for rational reasons.
Keywords: autoenrollment; retirement savings; OregonSaves; employee participation; financial literacy
JEL Codes: D14; G5; J26; J32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Automatic enrollment (H55) | Increased employee savings (D14) |
| Automatic enrollment (H55) | Reduced search costs (D83) |
| Reduced search costs (D83) | Increased employee savings (D14) |
| Cannot afford to save (D14) | Opting out of oregonsaves (J26) |
| Do not need to save (Y70) | Opting out of oregonsaves (J26) |
| Liquidity constraints (E51) | High turnover rates among younger workers (J63) |
| High turnover rates (J63) | Low average account balances among younger workers (D14) |