Retirement Savings: A Tale of Decisions and Defaults

48 Pages Posted: 8 May 2018

See all articles by Loretti Dobrescu

Loretti Dobrescu

University of New South Wales, School of Economics

Xiaodong Fan

Monash University - Department of Economics

Hazel Bateman

UNSW Sydney, CEPAR

Ben Rhodri Newell

Independent

A. Ortmann

Independent

Susan Thorp

University of Sydney Business School; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2018

Abstract

This study develops a structural dynamic life‐cycle model to examine the behavior of members of an industry‐wide pension fund to assess both the prevalence of defaults and their impact on retirement savings. We estimate the model using the simulated method of moments on administrative data from a large Australian pension fund. Our results show that default settings strongly influence wealth accumulation. Such settings are also highly persistent, both over time and across decisions. Overall, the findings suggest that if defaults (particularly the irreversible ones) are not carefully designed, retirement savings can be severely affected.

Suggested Citation

Dobrescu, Loretti Isabella and Fan, Xiaodong and Bateman, Hazel and Newell, Ben Rhodri and Ortmann, A. and Thorp, Susan, Retirement Savings: A Tale of Decisions and Defaults (May 2018). The Economic Journal, Vol. 128, Issue 610, pp. 1047-1094, 2018. Available at SSRN: https://ssrn.com/abstract=3174985 or http://dx.doi.org/10.1111/ecoj.12447

Loretti Isabella Dobrescu (Contact Author)

University of New South Wales, School of Economics ( email )

High Street
Sydney, NSW 2052
Australia

Xiaodong Fan

Monash University - Department of Economics ( email )

Australia

Hazel Bateman

UNSW Sydney, CEPAR ( email )

High Street
Sydney, NSW 2052
Australia

Ben Rhodri Newell

Independent

No Address Available

A. Ortmann

Independent

No Address Available

Susan Thorp

University of Sydney Business School ( email )

P.O. Box H58
Sydney, NSW 2006
Australia
+61 2 9351 6354 (Phone)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

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