Matching Contributions and Savings Outcomes: A Behavioral Economics Perspective

30 Pages Posted: 14 Jul 2012 Last revised: 19 Jul 2012

See all articles by Brigitte C. Madrian

Brigitte C. Madrian

Brigham Young University Marriott School of Business; National Bureau of Economic Research (NBER)

Date Written: July 2012

Abstract

Including a matching contribution increases savings plan participation and contributions, although the impact is less significant than the impact of nonfinancial approaches. Conditional on participation, a higher match rate has only a small effect on savings plan contributions. In contrast, the match threshold has a substantial impact, probably because it serves as a natural reference point when individuals are deciding how much to save and may be viewed as advice from the savings program sponsor on how much to save. Other behavioral approaches to changing savings plan outcomes--including automatic enrollment, simplification, planning aids, reminders, and commitment features--potentially have a much greater impact on savings outcomes than do financial incentives, often at a much lower cost.

Suggested Citation

Madrian, Brigitte C., Matching Contributions and Savings Outcomes: A Behavioral Economics Perspective (July 2012). NBER Working Paper No. w18220. Available at SSRN: https://ssrn.com/abstract=2105966

Brigitte C. Madrian (Contact Author)

Brigham Young University Marriott School of Business ( email )

Provo, UT 84602
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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