The effect of providing peer information on retirement savings decisions

Investigators:

Katherine Milkman, John Beshears, James Choi, David Laibson, and Brigitte Madrian

Summary:

This project uses a field experiment to investigate the effect of a peer information intervention on retirement savings choices. We conducted our experiment in partnership with a large manufacturing firm and its retirement savings plan administrator. Employees received different letters depending on their 401(k) enrollment status. Employees who had never participated in the firm’s 401(k) plan were mailed Quick Enrollment (QE) letters, which allowed them to start contributing 6% of their pay to the plan with a pre-selected asset allocation by returning a simple reply form. Employees who had previously enrolled but were contributing less than 6% of their pay received Easy Escalation (EE) letters, which included a nearly identical reply form that could be returned to increase their contribution rate to 6%. Previous work has shown that these simplified enrollment and contribution escalation mechanisms significantly increase savings plan contributions (Choi, Laibson, and Madrian, 2009; Beshears et al., forthcoming).

Papers:

Beshears, John, James Choi, David Laibson, Brigitte Madrian, and Katherine Milkman. The Effect of Providing Peer Information on Retirement Savings Decisions. Journal of Finance. Revision requested.