Retirement Savings: A Tale of Decisions and Defaults

Loretti Dobrescu, Xiaodong Fan (), Hazel Bateman, Ben Rhodri Newell, Andreas Ortmann and Susan Thorp

Economic Journal, 2018, vol. 128, issue 610, 1047-1094

Abstract: This study develops a structural dynamic life†cycle model to examine the behavior of members of an industry†wide pension fund to assess both the prevalence of defaults and their impact on retirement savings. We estimate the model using the simulated method of moments on administrative data from a large Australian pension fund. Our results show that default settings strongly influence wealth accumulation. Such settings are also highly persistent, both over time and across decisions. Overall, the findings suggest that if defaults (particularly the irreversible ones) are not carefully designed, retirement savings can be severely affected.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:wly:econjl:v:128:y:2018:i:610:p:1047-1094

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