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- December 2023
- Article
Save More Today or Tomorrow: The Role of Urgency in Precommitment Design
By: Joseph Reiff, Hengchen Dai, John Beshears, Katherine L. Milkman and Shlomo Benartzi
To encourage farsighted behaviors, past research suggests that marketers may be wise to invite consumers to pre-commit to adopt them “later.” However, the authors propose that people will draw different inferences from different types of pre-commitment offers, and that...
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- 2022
- Working Paper
Automating Short-Term Payroll Savings: Initial Evidence from a Large U.K. Experiment
By: Sarah Holmes Berk, John Beshears, James J. Choi and David Laibson
Automatic enrollment is often used to increase retirement plan participation. Can it be used to increase short-term savings as well? We evaluate preliminary data from an experiment at a large U.K. employer. After years of offering opt-in short-term payroll savings via...
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- 2022
- Article
How to Choose a Default
By: John Beshears, Richard T. Mason and Shlomo Benartzi
We have developed a model for setting a default when a population is choosing among ordered choices—that is, ones listed in ascending or descending order. A company, for instance, might want to set a default contribution rate that will increase employees’ average...
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- Article
Present Bias Causes and Then Dissipates Auto-enrollment Savings Effects
By: John Beshears, James J. Choi, David Laibson and Peter Maxted
Present bias causes procrastination, which leads households to stick with auto-enrollment defaults. However, present bias also engenders overconsumption. Separation from each employer generates a rollover of 401(k) balances to an individual retirement account (IRA)...
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- February 2022
- Article
Borrowing to Save? The Impact of Automatic Enrollment on Debt
By: John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian and William L. Skimmyhorn
Does automatic enrollment into a retirement plan increase financial distress due to increased borrowing outside the plan? We study a natural experiment created when the U.S. Army began automatically enrolling newly hired civilian employees into the Thrift Savings Plan....
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- Article
Using Fresh Starts to Nudge Increased Retirement Savings
By: John Beshears, Hengchen Dai, Katherine L. Milkman and Shlomo Benartzi
We conducted a field experiment to study the effect of framing future moments in time as new beginnings (or “fresh starts”). University employees (N=6,082) received mailings with an opportunity to choose between increasing their contributions to a savings plan...
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- January 2021
- Case
The FIRE Savings Calculator
By: Michael Parzen and Paul Hamilton
This case follows Carol Muñoz, a member of the Financial Independence, Retire Early (FIRE) lifestyle movement. At the age of 45, Carol is considering retiring and living off the $1 million she has accumulated. Using Monte Carlo simulation, Carol forecasts the...
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- 2022
- Working Paper
Optimal Illiquidity
By: John Beshears, James J. Choi, Christopher Clayton, Christopher Harris, David Laibson and Brigitte C. Madrian
We calculate the socially optimal level of illiquidity in an economy populated by households with taste shocks and naive present bias. The government chooses mandatory contributions to accounts, each witha different pre-retirement withdrawal penalty. Collected...
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Keywords:
Illiquidity;
Commitment;
Flexibility;
Savings;
Social Security;
Retirement;
Government Legislation;
Taxation;
Saving
- 2020
- Chapter
Building Emergency Savings Through Employer-Sponsored Rainy-Day Savings Accounts
By: John Beshears, James J. Choi, J. Mark Iwry, David C. John, David Laibson and Brigitte C. Madrian
Roughly half of Americans live paycheck to paycheck. When financial shocks occur during their working life, many of these households tap into their retirement savings accounts. We explore the practical considerations and challenges associated with helping households...
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- March 2020
- Article
Which Early Withdrawal Penalty Attracts the Most Deposits to a Commitment Savings Account?
By: John Beshears, James J. Choi, Christopher Harris, David Laibson, Brigitte C. Madrian and Jung Sakong
Previous research has shown that some people voluntarily use commitment contracts that restrict their own choice sets. We study how people divide money between two accounts: a liquid account that permits unrestricted withdrawals and a commitment account that is...
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- 2020
- Working Paper
Cutting the Gordian Knot of Employee Health Care Benefits and Costs: A Corporate Model Built on Employee Choice
By: Regina E. Herzlinger and Barak D. Richman
The U.S. employer-based health insurance tax exclusion created a system of employer-sponsored insurance (ESI) with limited insurance choices and transparency that may lock employed households into health plans that are costlier or different from those they prefer to...
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- 2018
- Chapter
Work and Workplace
By: Kai Ruggeri, Jana Berkessel, Jascha Achterberg, Gerhard M. Prinz, Alessandra Luna-Navarro, Jon M. Jachimowicz and A. V. Whillans
Work is a major part of many lives. While individual experiences with work will differ—from how long we work to what jobs we have and to what extent we enjoy them—almost everyone is affected by employment, whether they have a job or not. Decades of research in the...
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- Article
Does Front-Loading Taxation Increase Savings?: Evidence from Roth 401(k) Introductions
By: John Beshears, James J. Choi, David Laibson and Brigitte C. Madrian
Can governments increase private savings by taxing savings up front instead of in retirement? Roth 401(k) contributions are not tax-deductible in the contribution year, but withdrawals in retirement are untaxed. The more common before-tax 401(k) contribution is...
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- Article
Liquidity in Retirement Savings Systems: An International Comparison
By: John Beshears, James J. Choi, Joshua Hurwitz, David Laibson and Brigitte C. Madrian
We compare the liquidity that six developed countries have built into their employer-based defined contribution (DC) retirement schemes. In Germany, Singapore, and the UK, withdrawals are essentially banned no matter what kind of transitory income shock the household...
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Keywords:
Saving;
Financial Liquidity;
Retirement;
Canada;
Germany;
Australia;
United Kingdom;
United States;
Singapore
- Article
The Effect of Providing Peer Information on Retirement Savings Decisions
By: John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian and Katherine L. Milkman
Using a field experiment in a 401(k) plan, we measure the effect of disseminating information about peer behavior on savings. Low-saving employees received simplified plan enrollment or contribution increase forms. A randomized subset of forms stated the fraction of...
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- November 2013
- Article
Simplification and Saving
By: John Beshears, James J. Choi, David Laibson and Brigitte C. Madrian
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...
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- 2012
- Chapter
The Availability and Utilization of 401(k) Loans
By: John Beshears, James J. Choi, David Laibson and Brigitte C. Madrian
We document the loan provisions in 401(k) savings plans and how participants use 401(k) loans. Although only about 22% of savings plan participants who are allowed to borrow from their 401(k) have such a loan at any given point in time, almost half had used a 401(k)...
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- 2012
- Article
The Excess Burden of Government Indecision
By: Francisco J. Gomes, Laurence J. Kotlikoff and Luis M. Viceira
Governments are known for procrastinating when it comes to resolving painful policy problems. Whatever the political motives for waiting to decide, procrastination distorts economic decisions relative to what would arise with early policy resolution. In so doing, it...
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- April 2011
- Article
Behavioral Economics Perspectives on Public Sector Pension Plans
By: John Beshears, James J. Choi, David Laibson and Brigitte C. Madrian
We describe the pension plan features of the states and the largest cities and counties in the U.S. Unlike in the private sector, defined benefit (DB) pensions are still the norm in the public sector. However, a few jurisdictions have shifted towards defined...
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- 2008
- Chapter
Life-Cycle Funds
By: Luis M. Viceira
The U.S. retirement system has experienced a substantial transformation in recent years. It has evolved from a system in which employees relied mainly on Social Security and professionally managed defined benefit (DB) pension plans sponsored by their employers to...
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