Who is a Passive Saver Under Opt-In and Auto-Enrollment?

Gopi Goda, Matthew Levy, Colleen Flaherty Manchester, Aaron Sojourner and Joshua Tasoff

No 2019-050, Working Papers from Human Capital and Economic Opportunity Working Group

Abstract: Defaults have been shown to have a powerful effect on retirement saving behavior yet there is limited research on who is most affected by defaults and whether this varies based on features of the choice environment. Using administrative data on employer-sponsored retirement accounts linked to survey data, we estimate the relationship between retirement saving choices and individual characteristics – long-term discounting, present bias, financial literacy, and exponential growth bias – under two distinct choice environments: an opt-in regime and an auto-enrollment regime. Consistent with our conceptual model, we find that the determinants of following the default and contribution behavior are regime-specific. Under the opt-in regime, financial literacy plays an important role in predicting total contributions, active saving choices, and maxing out contributions in the tax-preferred account. In contrast, under the auto-enrollment regime, present bias is the most significant behavioral predictor of contribution behavior. A causal interpretation of the estimates suggests that auto-enrollment increases saving primarily among those with low financial literacy.

Keywords: present bias; exponential-growth bias; household finance; retirement savings decisions; choice architecture; defaults; financial literacy; procrastination (search for similar items in EconPapers)
JEL-codes: D91 G11 J26 (search for similar items in EconPapers)
Date: 2019-08
New Economics Papers: this item is included in nep-age and nep-fle
Note: MIP
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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http://humcap.uchicago.edu/RePEc/hka/wpaper/Goda_L ... ive-saver-opt-in.pdf First version, July 18, 2019 (application/pdf)

Related works:
Journal Article: Who is a passive saver under opt-in and auto-enrollment? (2020)
Working Paper: Who is a passive saver under opt-in and auto-enrollment? (2020)
Working Paper: Who is a Passive Saver Under Opt-In and Auto-Enrollment? (2019)
Working Paper: Who Is a Passive Saver under Opt-In and Auto-Enrollment? (2019)
Working Paper: Who is a Passive Saver Under Opt-In and Auto-Enrollment? (2019)
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