Matching Contributions and Savings Outcomes: A Behavioral Economics Perspective / Brigitte C. Madrian.

By:

Madrian, Brigitte C

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w18220.Publication details: Cambridge, Mass. National Bureau of Economic Research 2012.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Including a matching contribution increases savings plan participation and contributions, although the impact is less significant than the impact of nonfinancial approaches. Conditional on participation, a higher match rate has only a small effect on savings plan contributions. In contrast, the match threshold has a substantial impact, probably because it serves as a natural reference point when individuals are deciding how much to save and may be viewed as advice from the savings program sponsor on how much to save. Other behavioral approaches to changing savings plan outcomes--including automatic enrollment, simplification, planning aids, reminders, and commitment features--potentially have a much greater impact on savings outcomes than do financial incentives, often at a much lower cost.

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July 2012.

Including a matching contribution increases savings plan participation and contributions, although the impact is less significant than the impact of nonfinancial approaches. Conditional on participation, a higher match rate has only a small effect on savings plan contributions. In contrast, the match threshold has a substantial impact, probably because it serves as a natural reference point when individuals are deciding how much to save and may be viewed as advice from the savings program sponsor on how much to save. Other behavioral approaches to changing savings plan outcomes--including automatic enrollment, simplification, planning aids, reminders, and commitment features--potentially have a much greater impact on savings outcomes than do financial incentives, often at a much lower cost.