Working Paper: NBER ID: w8655
Authors: James J. Choi; David Laibson; Brigitte C. Madrian; Andrew Metrick
Abstract: We assess the impact on savings behavior of several different 401(k) plan features, including automatic enrollment, automatic cash distributions, employer matching provisions, eligibility requirements, investment options, and financial education. We also present new survey evidence on individual savings adequacy. Many of our conclusions are based on an analysis of micro-level administrative data on the 401(k) savings behavior of employees in several large corporations that implemented changes in their 401(k) plan design. Our analysis identifies a key behavioral principle that should partially guide the design of 401(k) plans: employees often follow 'the path of least resistance.' For better or for worse, plan administrators can manipulate the path of least resistance to powerfully influence the savings and investment choices of their employees.
Keywords: 401k; savings behavior; automatic enrollment; financial education; employer matching
JEL Codes: J32; H55; G11; D91
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| automatic enrollment (H55) | participation rates (J22) |
| automatic cash distributions (G35) | retirement wealth accumulation (G51) |
| employer matching provisions (H55) | participation rates (J22) |
| employer matching provisions (H55) | contribution levels (D64) |
| financial education (G53) | savings behavior (D14) |