Heuristics and Biases in Retirement Savings Behavior

Journal of Economic Perspectives, Forthcoming

41 Pages Posted: 22 Jan 2007

See all articles by Shlomo Benartzi

Shlomo Benartzi

University of California at Los Angeles

Richard H. Thaler

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Abstract

Saving for retirement is a difficult problem, and most employees have little training upon which to draw in making the relevant decisions. Perhaps as a result, investors are relatively passive. They are slow to join advantageous plans; they make infrequent changes; and they adopt naïve diversification strategies. In short, they need all the help they can get. Fortunately, many effective ways to help participants are also the least costly interventions: namely, small changes in plan design, sensible default options and opportunities to increase savings rates and rebalance portfolios automatically. These design features help less sophisticated investors while maintaining flexibility for more sophisticated types.

Keywords: Retirement savings, 401(k) plans, behavioral finance

Suggested Citation

Benartzi, Shlomo and Thaler, Richard H., Heuristics and Biases in Retirement Savings Behavior. Journal of Economic Perspectives, Forthcoming, Available at SSRN: https://ssrn.com/abstract=958585

Shlomo Benartzi (Contact Author)

University of California at Los Angeles ( email )

D410 Anderson Complex
Los Angeles, CA 90095-1481
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310-206-9939 (Phone)
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Richard H. Thaler

University of Chicago - Booth School of Business ( email )

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Chicago, IL 60637
United States
773-702-5208 (Phone)
773-702-0458 (Fax)

National Bureau of Economic Research (NBER)

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