Choice Architecture and Retirement Saving Plans
University of California at Los Angeles
University of California, Los Angeles (UCLA) - Anderson School of Management
Richard H. Thaler
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)
In this paper, we apply basic principles from the domain of design and architecture to choices made by employees saving for retirement. Three of the basic principles of design we apply are: (1) there is no neutral design, (2) design does matter, and (3) many of the seemingly minor design elements could matter as well. Applying these principles to the domain of retirement savings, we show that the design of retirement saving vehicles has a large effect on saving rates and investment elections, and that some of the minor details involved in the architecture of retirement plans could have dramatic effects on savings behavior. We conclude our paper by discussing how lessons learned from the design of objects could be applied to help people make better decisions, which we refer to as 'choice architecture.'
Keywords: Retirement saving plans, Investment decisions, Life-cycle
JEL Classification: D91, G11, H55, J32working papers series
Date posted: July 11, 2007 ; Last revised: February 21, 2011
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