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Heuristics and Biases in Retirement Savings Behavior

Shlomo Benartzi

University of California at Los Angeles

Richard H. Thaler

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Journal of Economic Perspectives, Forthcoming

Saving for retirement is a difficult problem, and most employees have little training upon which to draw in making the relevant decisions. Perhaps as a result, investors are relatively passive. They are slow to join advantageous plans; they make infrequent changes; and they adopt naïve diversification strategies. In short, they need all the help they can get. Fortunately, many effective ways to help participants are also the least costly interventions: namely, small changes in plan design, sensible default options and opportunities to increase savings rates and rebalance portfolios automatically. These design features help less sophisticated investors while maintaining flexibility for more sophisticated types.

Number of Pages in PDF File: 41

Keywords: Retirement savings, 401(k) plans, behavioral finance

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Date posted: January 22, 2007  

Suggested Citation

Benartzi, Shlomo and Thaler, Richard H., Heuristics and Biases in Retirement Savings Behavior. Journal of Economic Perspectives, Forthcoming. Available at SSRN: http://ssrn.com/abstract=958585

Contact Information

Shlomo Benartzi (Contact Author)
University of California at Los Angeles ( email )
D410 Anderson Complex
Los Angeles, CA 90095-1481
United States
310-206-9939 (Phone)
310-267-2193 (Fax)
Richard H. Thaler
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-5208 (Phone)
773-702-0458 (Fax)
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