Who Is a Passive Saver under Opt-In and Auto-Enrollment?

Gopi Goda, Matthew R. Levy (), Colleen Flaherty Manchester (), Aaron Sojourner and Joshua Tasoff ()
Additional contact information
Matthew R. Levy: London School of Economics
Colleen Flaherty Manchester: University of Minnesota
Joshua Tasoff: Claremont Graduate University

No 12497, IZA Discussion Papers from Institute of Labor Economics (IZA)

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 saving decisions; choice architecture; defaults; financial literacy; procrastination (search for similar items in EconPapers)
JEL-codes: D14 D15 D91 J26 J32 M52 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2019-07
New Economics Papers: this item is included in nep-age and nep-fle
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published - published in: Journal of Economic Behavior & Organization , 2020, 173, 301-321

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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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