Nudges and Signposts: The Effect of Smart Defaults and Pictographic Risk Information on Retirement Saving Investment Choices

Journal of Behavioral Decision Making, Forthcoming

Posted: 20 Aug 2018 Last revised: 22 Mar 2019

See all articles by Adrian Camilleri

Adrian Camilleri

University of Technology Sydney

Marie-Anne Cam

RMIT University; Financial Research Network (FIRN)

Robert Hoffmann

RMIT University - School of Economics, Finance and Marketing

Date Written: February 12, 2019

Abstract

The authors tested two interventions to improve retirement savings investment decisions. In an incentive‐compatible experiment, 459 participants engaged in a task simulating their working life. Periodically during the simulation, participants chose between different investment options. The authors examined the effectiveness of a “nudge” by manipulating the default option and the effectiveness of a “signpost” by manipulating the display of a pictograph summarizing the expected return of each option. Participants often followed the default option, particularly when it was “smart” (i.e., became more conservative as retirement approached) and when presented together with dynamic pictographs (i.e., updated each year assuming the investment was held until retirement). Those most likely to make optimal choices (i.e., consistent with the life cycle model) were presented with a smart default or dynamic pictographs. These findings reveal how different choice architecture interventions can be used to positively influence behavior. Retirement funds and regulators can support retirement savings decisions by the provision of smart defaults and better risk information in the form of pictographs.

Keywords: risk, retirement savings, choice architecture, nudge, signpost, defaults, pictograph

Suggested Citation

Camilleri, Adrian and Cam, Marie-Anne and Hoffmann, Robert, Nudges and Signposts: The Effect of Smart Defaults and Pictographic Risk Information on Retirement Saving Investment Choices (February 12, 2019). Journal of Behavioral Decision Making, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3227378 or http://dx.doi.org/10.2139/ssrn.3227378

Adrian Camilleri (Contact Author)

University of Technology Sydney ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

Marie-Anne Cam

RMIT University ( email )

Business
Level 12, 239 Bourke Street
Melbourne, Victoria 3000
Australia
+61 399255503 (Phone)
+61 399255986 (Fax)

HOME PAGE: http://rmit.com.au/browse/About%20RMIT%2FContact%2FAll%20contacts%2FStaff%2Fby%20name%2FC%2F;ID=ldfn

Financial Research Network (FIRN)

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

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

Robert Hoffmann

RMIT University - School of Economics, Finance and Marketing ( email )

Level 12, 239 Bourke Street
Melbourne, Victoria 3000
Australia

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