$100 Bills on the Sidewalk: Violations of No-Arbitrage in 401(k) Accounts
MetadataShow full item record
CitationChoi, James J., David Laibson, and Brigitte Madrian. 2011. $100 Bills on the Sidewalk: Violations of No-Arbitrage in 401(k) Accounts. The Review of Economics and Statistics 93(3): 748-763.
AbstractWe identify employees at seven companies whose 401(k) investment choices are dominated because they are contributing less than the employer matching contribution threshold despite being vested in their match and being able to make penalty-free 401(k) withdrawals for any reason because they are older than 59½. At the average firm, 36% of match-eligible employees over age 59½ forgo arbitrage profits that average 1.6% of their annual pay, or $507. A survey educating employees about the free lunch they are forgoing raised contribution rates by a statistically insignificant 0.67% of income among those completing the survey.
Citable link to this pagehttp://nrs.harvard.edu/urn-3:HUL.InstRepos:9647368
- HKS Faculty Scholarship