IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp11538.html
   My bibliography  Save this paper

Less Is Not More: Information Presentation Complexity and 401(k) Planning Choices

Author

Listed:
  • Cardella, Eric

    () (Texas Tech University)

  • Kalenkoski, Charlene M.

    () (Texas Tech University)

  • Parent, Michael

    () (University of Texas at Austin)

Abstract

This paper presents the results of an experiment that is designed to examine how information presentation and complexity impact retirement-savings behavior. The experiment is performed twice, using both a Qualtrics panel of new employees and a sample of business school students. In this experiment, participants first were provided with either a long or short description of a hypothetical employer-sponsored 401(k) plan. Then they were asked whether they would enroll in the hypothetical plan and, if so, what percentage of their salary they would contribute. If they chose to contribute, they were asked how they would like to allocate their contribution between stocks and bonds. Participants were offered the option to stick with pre-assigned default options such as a 4% contribution and a 50-50 stocks and bonds split. The hypothesis is that providing concise information with helpful recommendations would improve choices over providing lengthy and detailed information. However, controlling for demographic and other factors, this hypothesis was not supported by the data, for either the new employees or the business school students. Thus, the data suggest that simplifying the presentation of retirement-plan information to employees is unlikely to result in vastly improved retirement-planning choices.

Suggested Citation

  • Cardella, Eric & Kalenkoski, Charlene M. & Parent, Michael, 2018. "Less Is Not More: Information Presentation Complexity and 401(k) Planning Choices," IZA Discussion Papers 11538, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp11538
    as

    Download full text from publisher

    File URL: http://ftp.iza.org/dp11538.pdf
    Download Restriction: no

    More about this item

    Keywords

    retirement planning; 401(k); information complexity; nudge; choice architecture;

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp11538. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak). General contact details of provider: http://www.iza.org .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.