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Matching Contributions and Savings Outcomes: A Behavioral Economics Perspective

  • Brigitte C. Madrian

Including a matching contribution increases savings plan participation and contributions, although the impact is less significant than the impact of nonfinancial approaches. Conditional on participation, a higher match rate has only a small effect on savings plan contributions. In contrast, the match threshold has a substantial impact, probably because it serves as a natural reference point when individuals are deciding how much to save and may be viewed as advice from the savings program sponsor on how much to save. Other behavioral approaches to changing savings plan outcomes--including automatic enrollment, simplification, planning aids, reminders, and commitment features--potentially have a much greater impact on savings outcomes than do financial incentives, often at a much lower cost.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18220.

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Date of creation: Jul 2012
Date of revision:
Publication status: published as Matching Contributions and Savings Outcomes: A Behavioral Economics Perspective Authors/Editors: Brigitte C. Madrian Matching Contributions for Pensions Published: October 2012 Pages: 289 - 309
Handle: RePEc:nbr:nberwo:18220
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