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Assisted savings for retirement: An experimental analysis

Author

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  • Bohr, Clement E.
  • Holt, Charles A.
  • Schubert, Alexandra V.

Abstract

This paper evaluates the benefit of a basic retirement savings program. It considers a life-cycle experiment with interest paid on a safe asset and returns on a risky asset that induce a stationary fundamental value. The private savings treatment provides an income stream that terminates at retirement. Observed consumption starts too high and finishes low in later periods. The assisted savings treatment smooths income over all periods, which dampens asset price bubbles and improves consumption profiles. This improvement persists in treatments done without asset trading, but disappears with sharply reduced interest rates that simplify present value considerations.

Suggested Citation

  • Bohr, Clement E. & Holt, Charles A. & Schubert, Alexandra V., 2019. "Assisted savings for retirement: An experimental analysis," European Economic Review, Elsevier, vol. 119(C), pages 42-54.
    • Handle: RePEc:eee:eecrev:v:119:y:2019:i:c:p:42-54
    DOI: 10.1016/j.euroecorev.2019.05.020
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    Cited by:

    1. Lu, Kelin, 2022. "Overreaction to capital taxation in saving decisions," Journal of Economic Dynamics and Control, Elsevier, vol. 144(C).
    2. Bachmann, Kremena & Lot, Andre & Xu, Xiaogeng & Hens, Thorsten, 2023. "Experimental Research on Retirement Decision-Making: Evidence from Replications," Journal of Banking & Finance, Elsevier, vol. 152(C).

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    More about this item

    Keywords

    Consumption; Saving; Retirement; Price bubbles; Laboratory experiments;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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