Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/207323 
Year of Publication: 
2019
Series/Report no.: 
IZA Discussion Papers No. 12497
Publisher: 
Institute of Labor Economics (IZA), Bonn
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.
Subjects: 
present bias
exponential-growth bias
household finance
retirement saving decisions
choice architecture
defaults
financial literacy
procrastination
JEL: 
D91
J26
J32
D14
D15
M52
Document Type: 
Working Paper

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