Policy makers should understand people’s attitudes towards opt-out nudges to smoothly promote and implement the policies. Our research compares people’s perceptions of opt-in and three improved versions of opt-out (transparency, emphasis on the low-cost opt-out option, education) in pro-social and pro-self policy domains, e.g., organ donation (N=610), carbon emission offset (N=613), and retirement saving (N=602). We found that people acknowledged more practical and societal benefits of opt-out than opt-in in organ donation and retirement saving but less so in carbon emission offset. Improved opt-out policies failed to address ethical concerns and most emotional discomfort concerns in organ donation whereas opt-out transparency and emphasis on low-cost opt-out were more successful than education at addressing concerns in retirement saving and carbon emission offset. Nonetheless, transparency and education may raise consciousness of policies’ aims. The results suggest that 1) acceptability of opt-out approaches may be more difficult to enhance in some domains than others; 2) policy makers should ensure the public understands that opt-out is a convenient choice and may consider combining all forms of improvement to increase people’s acceptance of opt-out nudges.

We use administrative data on federal civilian workers' accounts in their employer-provided defined contribution plan, called the thrift savings plan (TSP), to provide new evidence on the effects of employer matching and defaults on workers' savings behavior. The empirical analysis relies on exogenous variation stemming from two natural experiments caused by policy changes to the TSP: the establishment of an employer match for workers hired after 1983 and the introduction of automatic enrollment for workers hired after July 2010. We find that the introduction of the employer match lead to a higher increase in both participation and contribution rates compared to the subsequent switch to automatic enrollment. In terms of portfolio allocations, we find that matching and automatic enrollment had small and minimal effects, respectively.

Target-date funds in corporate retirement plans grew from $5 billion in 2000 to $734 billion in 2018, partly because federal regulation sanctioned these as default investments in automatic enrollment plans. We show that adopters delegated pension investment decisions to fund managers selected by plan sponsors. Inclusion of these funds in retirement saving menus raised equity shares, boosted bond exposures, curtailed cash/company stock holdings, and reduced idiosyncratic risk. The adoption of low-cost target-date funds may enhance retirement wealth by as much as 50% over a 30-year horizon.

This study examines retirement saving activity outside the state and workplace pension saving schemes among British adults aged between 30 and 49 on the premise that individuals are increasingly encouraged to save for their retirement in the new pension policy structure in Britain. The issue of under-saving among the younger adults has been studied with the focus on internal characteristics, such as undesirable attitudinal or behavioural tendencies (‘won't save’), or on external factors, such as income (‘can't save’). Building on these discussions, this study tests the role of internal characteristics and further examines the interplay between internal and external factors. The decision-making process for retirement saving is mapped based on the Model of Financial Planning with minor modifications. The analysis utilises the fourth wave of the Wealth and Assets Survey (2012/2014), and is conducted in the structural equation modelling framework. Results show that younger adults’ discretionary retirement saving is an outcome of a complex interplay between internal and external factors. Financial resilience, which indicates current financial behaviours and wellbeing, is found to be the strongest predictor for identifying a discretionary retirement saver, but it is closely connected to individuals’ income and home-ownership. The findings also suggest that social and economic arrangements are important to consider as social ageing, individuals’ projection on their lifestages, may be more informative than age per se for understanding younger adults’ retirement saving behaviour. These findings have important implications for the policies that aim to increase retirement saving participation.

This paper examines retirement saving policy for independent – or contingent – workers, a growing segment of the workforce. Because few of these workers are covered by employer-sponsored retirement plans, they often do not benefit from payroll deduction, employer matching contributions, automatic enrollment, and other provisions that encourage retirement saving. Better use of fintech, judicious changes to tax policy, and expanded Automatic IRAs would help independent workers save for retirement. In addition, we propose the creation of retirement saving accounts that attach to the worker as a supplement to, and possible replacement for, the current system of employer-sponsored accounts.

The growth and popularity of defined contribution pensions, along with the government's increasing attention to retirement plan costs and investment choices provided, make it important to understand how people select their retirement plan investments. This paper shows how employees in a large firm altered their fund allocations when the employer streamlined its pension fund menu and deleted nearly half of the offered funds. Using administrative data, we examine the changes in plan participant investment choices that resulted from the streamlining and how these changes might affect participants’ eventual retirement wellbeing. We show that streamlined participants’ new allocations exhibited significantly lower within-fund turnover rates and expense ratios, and we estimate this could lead to aggregate savings for these participants over a 20-year period of $20.2 M, or in excess of $9,400 per participant. Moreover, after the reform, streamlined participants’ portfolios held significantly less equity and exhibited significantly lower risks by way of reduced exposures to most systematic risk factors, compared with their non-streamlined counterparts.

We provide new empirical evidence on the importance of defined contribution pension wealth in England, and the nature of annuitization decisions taken by older adults who retire with such sources of wealth. Other things equal, financial literacy, and numeracy in particular, are important factors governing individuals’ choices over whether to shop around for an annuity as opposed to taking the ‘path of least resistance’ option and purchasing from their original pension fund provider. This has important policy and welfare implications given that buying an annuity on the open market has significant financial benefits for most people. In the context of the increasing reliance on private provision for retirement, the importance of individuals having the financial literacy to successfully navigate complex financial decisions late in life should not be underestimated.

The booms and busts of the late 1990s and 2000s have taken 401(k) plan participants on a rollercoaster ride. Using data from administrative tax records and household surveys, this paper examines how participants responded to these periods of economic expansions and contractions by documenting changes in 401(k) participation, contributions, and contribution rates from 1990 to 2009. Controlling for earnings, job changes, and other household factors, we find that workers reduce their 401(k) participation and contributions during recessions – suggesting that they may be responding to changes in their expectations about the economy and stock market. We estimate that changes in participant behavior during the Great Recession, in particular, could lower 401(k) assets of the typical 30-year-old by as much as 8% at age 62.

Many economists and policy-makers argue that households do not save enough to maintain an adequate standard of living during retirement. However, there is no consensus on the answer to the underlying question about what this standard should be, despite the fact that it is crucial for the design of saving incentives and pension systems. We address this question with a randomized survey design, individually tailored to each respondent's financial situation, and conducted both in the U.S. and The Netherlands. We find that adequate levels of retirement spending exceed 80% of working life spending for a majority of respondents. Minimum acceptable income replacement rates range from 95 to 45% across income quintiles in the U.S., and from 75 to 60% across income quintiles in The Netherlands. The smaller range in The Netherlands may in part reflect the much tighter income distribution there.