Procrastination, Present-Biased Preferences, and Financial Behaviors

Jeffrey R. Brown, Alessandro Previtero

NBER Retirement Research Center Paper No. NB 14-04
Issued in September 2014

We provide new and robust empirical evidence that procrastinators behave differently than non-procrastinators for five important retirement-related financial behaviors. Empirically, we define a procrastinator as an individual who waits until the last day of their health care open enrollment period to make their plan election. Using three separate administrative data sets, we show that procrastinators are: (i) less likely to participate in a supplemental savings plan, (ii) take longer to sign up for 401(k) plans, (iii) contribute less, (iv) are more likely to stick with default portfolio allocations, and (v) are less likely to take the annuity payout option from their DB plan, especially when the plan is framed so as to make the investment features more salient. Further evidence shows that these findings are best explained by procrastination being the outcome of present-biased preferences, consistent with the predictions of leading economic models of procrastination.

PDF (915 K)Executive Summary (61 K)