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Narrow Framing and Retirement Savings Decisions

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  • Serah Shin
  • Hyungsoo Kim
  • Claudia J. Heath

Abstract

Theoretical studies suggest narrow framing underlies individuals' saving decisions. When narrow framing is applied to retirement savings decisions, narrow framers tend to make decisions about present consumption without considering future consumption, i.e., saving for consumption in retirement. Time preference for the present and narrow framers' preference to maintain the status quo lead to a decision that is less likely to increase savings for retirement. This study provides empirical evidence that narrow framing bias affects retirement savings decisions. Using a two‐part model, the probit estimation indicates narrow framers anticipated being less willing to increase retirement savings contributions compared to broad framers, and the OLS regression estimates that narrow framers anticipated contributing less than broad framers. Here, narrow framers anticipated being less willing to increase retirement savings (62.6% vs. 71.9%) and contributing less ($70.90 vs. $88.40) than broad framers, thus providing empirical evidence regarding the effects of behavioral biases on financial decisions.

Suggested Citation

  • Serah Shin & Hyungsoo Kim & Claudia J. Heath, 2019. "Narrow Framing and Retirement Savings Decisions," Journal of Consumer Affairs, Wiley Blackwell, vol. 53(3), pages 975-997, September.
    • Handle: RePEc:bla:jconsa:v:53:y:2019:i:3:p:975-997
    DOI: 10.1111/joca.12211
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    Cited by:

    1. Kyoung Tae Kim & Soo Hyun Cho & Sharon A. DeVaney, 2021. "Racial/ethnic differences in holding a retirement saving motive: A decomposition analysis," Journal of Consumer Affairs, Wiley Blackwell, vol. 55(2), pages 464-482, June.

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