Set it and forget it? Financing retirement in an age of defaults

Lucas Goodman, Anita Mukherjee and Shanthi Ramnath

Journal of Financial Economics, 2023, vol. 148, issue 1, 47-68

Abstract: Retirement savings abandonment is a rising concern connected to defined contribution systems and default enrollment. We use tax data on Individual Retirement Accounts (IRAs) to establish that for a recent cohort, 0.4% of retirement-age individuals abandoned an aggregate of $66 million, proxied by a failure to claim over ten years after a legal requirement to do so. Analysis of state unclaimed property databases suggests that workplace defined contribution plans are abandoned at a higher rate than IRAs. Finally, regression discontinuity estimates show that certain accounts created by default enrollment are at higher risk of abandonment by passive savers.

Keywords: Household finance; Financial literacy; Retirement savings; Auto-enrollment (search for similar items in EconPapers)
JEL-codes: D83 H24 H31 J14 J32 J63 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:148:y:2023:i:1:p:47-68

DOI: 10.1016/j.jfineco.2023.02.002

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