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Can Simple Informational Nudges Increase Employee Participation in a 401(k) Plan?

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  • Robert L. Clark
  • Jennifer A. Maki
  • Melinda Sandler Morrill

Abstract

We report results from a field experiment in which a randomized subset of newly hired workers at a large financial institution received a flyer containing information about the employer's 401(k) plan and the value of contributions compounding over a career. Younger workers who received the flyer were significantly more likely to begin contributing to the plan relative to their peers in the control group. Many workers do not participate in their employers' supplemental retirement savings programs, even though these programs offer substantial tax advantages and immediate returns due to matching contributions. From a survey of new hires, we find that many workers choose not to contribute to the plan because they have other financial priorities. However, some nonparticipants lack the financial literacy to appreciate the benefit. These findings indicate that simple informational interventions can nudge workers to participate in retirement saving plans and enhance individual well‐being and retirement income security.

Suggested Citation

  • Robert L. Clark & Jennifer A. Maki & Melinda Sandler Morrill, 2014. "Can Simple Informational Nudges Increase Employee Participation in a 401(k) Plan?," Southern Economic Journal, John Wiley & Sons, vol. 80(3), pages 677-701, January.
    • Handle: RePEc:wly:soecon:v:80:y:2014:i:3:p:677-701
    DOI: 10.4284/0038-4038-2012.199
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    2. Jana Schuetz, 2024. "Beliefs about the Gender Pension Gap," Jena Economics Research Papers 2024-004, Friedrich-Schiller-University Jena.
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    More about this item

    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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