Reducing the Complexity Costs of 401(k) Participation Through Quick Enrollment(TM)
AbstractThe complexity of the retirement savings decision may overwhelm employees, encouraging procrastination and reducing 401(k) enrollment rates. We study a low-cost manipulation designed to simplify the 401(k) enrollment process. Employees are given the option to make a Quick Enrollment(TM) election to enroll in their 401(k) plan at a pre-selected contribution rate and asset allocation. By decoupling the participation decision from the savings rate and asset allocation decisions, the Quick Enrollment(TM) mechanism simplifies the savings plan decision process. We find that at one company, Quick Enrollment(TM) tripled 401(k) participation rates among new employees three months after hire. When Quick Enrollment(TM) was offered to previously hired non-participating employees at two firms, participation increased by 10 to 20 percentage points among those employees affected.
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Bibliographic InfoPaper provided by UCLA Department of Economics in its series Levine's Bibliography with number 122247000000000966.
Date of creation: 31 Dec 2005
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Other versions of this item:
- James Choi & David Laibson & Brigitte Madrian, 2006. "Reducing the Complexity Costs of 401(k) Participation Through Quick Enrollment(TM)," NBER Working Papers 11979, National Bureau of Economic Research, Inc.
- D0 - Microeconomics - - General
- E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-01-24 (All new papers)
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.:
- James Choi & David Laibson & Brigitte Madrian & Andrew Metrick, 2005.
"Optimal Defaults and Active Decisions,"
666156000000000488, UCLA Department of Economics.
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in: Perspectives on the Economics of Aging, pages 81-126
National Bureau of Economic Research, Inc.
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Behavioural Economics and Guardian Readers
by Liam Delaney in Geary Behaviour Centre on 2008-07-19 13:02:00
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