Standard economic theories of saving implicitly assume that households have the cognitive ability to solve the relevant optimization problem and the willpower to execute the optimal plan. Both of the implicit assumptions are suspect. Even among economists, few spend much time calculating a personal optimal savings rate. Instead, most people cope by adopting simple heuristics, or rules of thumb. In this paper, we investigate both the heuristics and the biases that emerge in the area of retirement savings. We examine the decisions employees make about whether to join a savings plan, how much to contribute, and how to invest. Saving for retirement is a difficult problem, and most employees have little training upon which to draw in making the relevant decisions. Perhaps as a result, investors are relatively passive. They are slow to join advantageous plans; they make infrequent changes; and they adopt naive diversification strategies. In short, they need all the help they can get. We discuss the possible role of interventions aiming to improve retirement decision making. Fortunately, many effective ways to help participants are also the least costly interventions: namely, small changes in plan design, sensible default options, and opportunities to increase savings rates and rebalance portfolios automatically.
Download Info
To our knowledge, this item is not available for
download. To find whether it is available, there are three
options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page
whether it is in fact available.
3. Perform a search for a similarly titled item that would be
available.
Volume (Year): 21 (2007) Issue (Month): 3 (Summer) Pages: 81-104 Download reference. The following formats are available: HTML
(with abstract),
plain text
(with abstract),
BibTeX,
RIS (EndNote, RefMan, ProCite),
ReDIF
For technical questions regarding this item, or to correct its listing, contact: (Christopher F. Baum).
Related research
Keywords:
Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)