Default, Framing and Spillover Effects: The Case of Lifecycle Funds in 401(k) Plans
AbstractImportant behavioral factors such as default and framing effects are increasingly being employed to optimize decision-making in a variety of settings, including individually-directed retirement plans. Yet such approaches may have unintended “spillover” effects, as we show with regard to the introduction of lifecycle funds in U.S. 401(k) plans. As anticipated, lifecycle funds do reshape individual portfolio choices through large default and framing effects. But unexpectedly, they also create a new class of investors which holds these funds as part of more complex portfolios. Our results are directly relevant to those interested in retirement plan design and retirement security; they also highlight the importance of assessing such spillover effects in other consequential settings where behavioral economics techniques may be employed.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15108.
Date of creation: Jun 2009
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Note: AG LS PE
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Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G2 - Financial Economics - - Financial Institutions and Services
- G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
- H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
- H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
- J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-07-03 (All new papers)
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- Kim, Hugh H. & Maurer, Raimond & Mitchell, Olivia S., 2013.
"Time is money: Life cycle rational inertia and delegation of investment management,"
CFS Working Paper Series
2013/08, Center for Financial Studies (CFS).
- Hugh H. Kim & Raimond Maurer & Olivia S. Mitchell, 2013. "Time is Money: Life Cycle Rational Inertia and Delegation of Investment Management," NBER Working Papers 19732, National Bureau of Economic Research, Inc.
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