Simplification and Saving

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Simplification and Saving

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Title: Simplification and Saving
Author: Beshears, John Leonard; Choi, James J.; Laibson, David I.; Madrian, Brigitte C.

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Citation: Beshears, John, James J. Choi, David I. Laibson, and Brigitte C. Madrian. Forthcoming. Simplification and saving. Journal of Economic Behavior and Organization.
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Abstract: The daunting complexity of important financial decisions can lead to procrastination. We evaluate a low-cost intervention that substantially simplifies the retirement savings plan participation decision. Individuals received an opportunity to enroll in a retirement savings plan at a pre-selected contribution rate and asset allocation, allowing them to collapse a multidimensional problem into a binary choice between the status quo and the pre-selected alternative. The intervention increases plan enrollment rates by 10–20 percentage points. We find that a similar intervention can be used to increase contribution rates among employees who are already participating in a savings plan.
Published Version: doi:10.1016/j.jebo.2012.03.007
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