Many investment companies have begun providing their defined-contribution pension participants with individualized, retirement income projections. The U.S. Congress is currently considering whether to require them all to do so. Evidence on the potential impact is scant, though a large body of economic research suggests that individuals are not currently making optimal retirement-saving decisions. Through a field experiment, we measure how provision of retirement income projections along with enrollment information affects individuals' contributions to employer-sponsored retirement accounts. We find that the intervention boosted annual contributions to employer retirement accounts by $85, equivalent to 3.6% of the average contribution level or 0.15% of average salary, relative to those who received no intervention. In addition, randomly-assigned assumptions regarding retirement age, investment returns, and hypothetical contribution amounts were used to generate the projections and were found to have significant impacts on saving behavior. This finding suggests that care is warranted in the design and communication of projections.
Bibliographical noteFunding Information:
We are grateful to Jackie Singer and Shelly Wymer for their assistance with administering this project. The research reported herein was performed pursuant to a grant from the U.S. Social Security Administration (SSA) funded as part of the Financial Literacy Center. The authors also acknowledge additional support provided by the TIAA-CREF Institute and the University of Minnesota Carlson School of Management . The authors thank the Editor, three anonymous referees, John Beshears, Jeff Brown, Wandi Bruine de Bruin, Katherine Carman, James Choi, Courtney Coile, Adeline Delavande, Maria Fitzpatrick, Bill Gale, Damon Jones, Amit Kramer, Ron Laschever, Annamaria Lusardi, Erzo F.P. Luttmer, Dayanand Manoli, Olivia Mitchell, Enrico Moretti, Victor Stango, Robert Willis, Joanne Yoong and seminar participants at the NBER Aging meetings, University of Illinois, University of Chicago, and George Washington University for comments. The opinions and conclusions expressed herein are solely those of the authors and do not represent the opinions or policy of SSA, any agency of the Federal Government, or any other institution with which the authors are affiliated. ©2014 Goda, Manchester and Sojourner. All rights reserved.
© 2014 Elsevier B.V.
- Defined contribution plans
- Financial literacy
- Lifetime income disclosures