Smaller than We Thought? The Effect of Automatic Savings Policies

James Choi, David Laibson, Jordan Cammarota, Richard Lombardo and John Beshears

No 32828, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Medium- and long-run dynamics undermine the effect of automatic enrollment and default savings-rate auto-escalation on retirement savings. Our analysis of nine 401(k) plans incorporates the facts that employees frequently leave firms (often before matching contributions from their employer have fully vested), a large percentage of 401(k) balances are withdrawn upon employment separation, and many employees opt out of auto-escalation. Steady-state saving rates increase by 0.6% of income due to automatic enrollment and 0.3% of income due to default autoescalation. Only 40% of those with an auto-escalation default escalate on their first escalation date, and more opt out later.

JEL-codes: D14 G40 G51 J32 (search for similar items in EconPapers)
Date: 2024-08
New Economics Papers: this item is included in nep-age
Note: AG PE
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