Heuristics and Biases in Retirement Savings Behavior
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
Date posted: January 22, 2007
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