Simplification and Saving

35 Pages Posted: 20 Nov 2006 Last revised: 8 Aug 2010

See all articles by John Beshears

John Beshears

Harvard Business School; National Bureau of Economic Research (NBER)

James J. Choi

Yale School of Management; National Bureau of Economic Research (NBER)

David Laibson

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Brigitte C. Madrian

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

Multiple version iconThere are 2 versions of this paper

Date Written: October 2006

Abstract

The daunting complexity of important financial decisions can lead to procrastination. We evaluate a low-cost intervention that substantially simplifies the retirement savings plan participation decision. Individuals received an opportunity to enroll in a retirement savings plan at a pre-selected contribution rate and asset allocation, allowing them to collapse a multidimensional problem into a binary choice between the status quo and the pre-selected alternative. The intervention increases plan enrollment rates by 10 to 20 percentage points. We find that a similar intervention can be used to increase contribution rates among employees who are already participating in a savings plan.

Suggested Citation

Beshears, John and Choi, James J. and Laibson, David I. and Madrian, Brigitte C., Simplification and Saving (October 2006). NBER Working Paper No. w12659. Available at SSRN: https://ssrn.com/abstract=940608

John Beshears

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
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National Bureau of Economic Research (NBER) ( email )

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James J. Choi (Contact Author)

Yale School of Management ( email )

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National Bureau of Economic Research (NBER) ( email )

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David I. Laibson

Harvard University - Department of Economics ( email )

Littauer Center
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National Bureau of Economic Research (NBER) ( email )

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United States

Brigitte C. Madrian

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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