Choice Architecture and Retirement Saving Plans

52 Pages Posted: 11 Jul 2007 Last revised: 21 Feb 2011

Shlomo Benartzi

University of California at Los Angeles

Ehud Peleg

University of California, Los Angeles (UCLA) - Anderson School of Management

Richard H. Thaler

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

Date Written: July 2007

Abstract

In this paper, we apply basic principles from the domain of design and architecture to choices made by employees saving for retirement. Three of the basic principles of design we apply are: (1) there is no neutral design, (2) design does matter, and (3) many of the seemingly minor design elements could matter as well. Applying these principles to the domain of retirement savings, we show that the design of retirement saving vehicles has a large effect on saving rates and investment elections, and that some of the minor details involved in the architecture of retirement plans could have dramatic effects on savings behavior. We conclude our paper by discussing how lessons learned from the design of objects could be applied to help people make better decisions, which we refer to as 'choice architecture.'

Keywords: Retirement saving plans, Investment decisions, Life-cycle

JEL Classification: D91, G11, H55, J32

Suggested Citation

Benartzi, Shlomo and Peleg, Ehud and Thaler, Richard H., Choice Architecture and Retirement Saving Plans (July 2007). Available at SSRN: https://ssrn.com/abstract=999420 or http://dx.doi.org/10.2139/ssrn.999420

Shlomo Benartzi

University of California at Los Angeles ( email )

D410 Anderson Complex
Los Angeles, CA 90095-1481
United States
310-206-9939 (Phone)
310-267-2193 (Fax)

Ehud Peleg (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Richard H. Thaler

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-5208 (Phone)
773-702-0458 (Fax)

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