Decision-Making Approaches and the Propensity to Default: Evidence and Implications
42 Pages Posted: 3 Feb 2015 Last revised: 4 Feb 2015
Date Written: February 3, 2015
This paper examines heterogeneity in the responsiveness to default options in a large state retirement plan, focusing on individuals’ decision-making approaches as well as their economic and demographic characteristics. Using a survey of plan participants, we find that procrastination and the need for cognitive closure are important determinants of the likelihood of default. We also explore an important implication of defaulting – individuals who default are significantly more likely to subsequently express a desire to enroll in a different plan. The desire to change plans is also correlated with numerous economic and decision-making characteristics, including procrastination.
Keywords: Default options, automatic enrollment, pensions, decision making
JEL Classification: D03, D14, G11
Suggested Citation: Suggested Citation