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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Web page: http://www.dklevine.com/
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.:
- Gabriel D. Carroll & James J. Choi & David Laibson & Brigitte Madrian & Andrew Metrick, 2005.
"Optimal Defaults and Active Decisions,"
NBER Working Papers
11074, National Bureau of Economic Research, Inc.
- James Choi & David Laibson & Brigitte Madrian & Andrew Metrick, 2005. "Optimal Defaults and Active Decisions," Levine's Bibliography 666156000000000488, UCLA Department of Economics.
- Carroll, Gabriel D. & Choi, James J. & Laibson, David I. & Madrian, Brigitte & Metrick, Andrew, 2009. "Optimal Defaults and Active Decisions," Scholarly Articles 4686776, Harvard University Department of Economics.
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NBER Working Papers
8651, National Bureau of Economic Research, Inc.
- James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2004. "For Better or for Worse: Default Effects and 401(k) Savings Behavior," NBER Chapters, in: Perspectives on the Economics of Aging, pages 81-126 National Bureau of Economic Research, Inc.
- James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2002. "For Better or For Worse: Default Effects and 401(k) Savings Behavior," JCPR Working Papers 256, Northwestern University/University of Chicago Joint Center for Poverty Research.
- Julie Agnew & Lisa R. Szykman, 2004. "Asset Allocation and Information Overload: The Influence of Information Display, Asset Choice and Investor Experience," Working Papers, Center for Retirement Research at Boston College wp2004-15, Center for Retirement Research, revised May 2004.
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"THE POWER OF SUGGESTION: INERTIA IN 401(k) PARTICIPATION AND SAVINGS BEHAVIOR,"
The Quarterly Journal of Economics,
MIT Press, vol. 116(4), pages 1149-1187, November.
- Brigitte C. Madrian & Dennis F. Shea, 2000. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," NBER Working Papers 7682, National Bureau of Economic Research, Inc.
- John T. Gourville & Dilip Soman, 2005. "Overchoice and Assortment Type: When and Why Variety Backfires," Marketing Science, INFORMS, vol. 24(3), pages 382-395, July.
- James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2004. "Saving or Retirement on the Path of Least Resistance," Levine's Bibliography 122247000000000606, UCLA Department of Economics.
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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