Reducing the Complexity Costs of 401(k) Participation Through Quick Enrollment

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Reducing the Complexity Costs of 401(k) Participation Through Quick Enrollment

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Title: Reducing the Complexity Costs of 401(k) Participation Through Quick Enrollment
Author: Laibson, David I.; Choi, James J.; Madrian, Brigitte

Note: Order does not necessarily reflect citation order of authors.

Citation: Choi, James J., David Laibson, and Brigitte C. Madrian. 2009. Reducing the complexity costs of 401(k) participation through quick enrollment. In Developments in the Economics of Aging, ed. D. A. Wise, 57-88. Chicago: University of Chicago Press.
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Abstract: The complexity of the retirement savings decision may overwhelm employees, encouraging procrastination and reducing 401(k) enrollment rates. We study a low-cost manipulation designed to simplify the 401(k) enrollment process. Employees are given the option to make a Quick Enrollment [TM] election to enroll in their 401(k) plan at a pre-selected contribution rate and asset allocation. By decoupling the participation decision from the savings rate and asset allocation decisions, the Quick Enrollment [TM] mechanism simplifies the savings plan decision process. We find that at one company, Quick Enrollment[TM] tripled 401(k)participation rates among new employees three months after hire. When Quick Enrollment [TM] was offered to previously hired non-participating employees at two firms, participation increased by 10 to 20 percentage points among those employees affected.
Published Version: http://EconPapers.repec.org/RePEc:nbr:nberwo:11979
Other Sources: http://www.nber.org/papers/w11979
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:4686772

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  • FAS Scholarly Articles [7362]
    Peer reviewed scholarly articles from the Faculty of Arts and Sciences of Harvard University
 
 

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