How Much to Save? Decision Costs and Retirement Plan Participation

Jacob Goldin, Tatiana Homonoff, Richard Patterson, and William Skimmyhorn
Revise and Resubmit at Journal of Public Economics

Deciding how much to save for retirement can be complicated. Drawing on a field experiment conducted with the Department of Defense, we study whether such complexity depresses participation in an employer-sponsored retirement saving plan. We find that simplifying one dimension of the enrollment decision, by highlighting a potential rate at which non-participants might contribute, increases participation in the plan. Similar communications that did not include a highlighted rate yield smaller effects. The results highlight how reducing complexity on the intensive margin of a decision (how much to contribute) can spill over into extensive margin behavior (whether to contribute at all).