The Importance of Default Options for Retirement Saving Outcomes
Evidence from the United States
This chapter demonstrates the tremendous influence that defaults exert on realized savings outcomes at every stage of the savings life cycle, such as savings plan participation, contributions, asset allocation, rollovers, and decumulation. In a defined contribution savings environment, savings plans—whether they are employer-sponsored, government-sponsored, or privately sponsored—are only a useful tool to the extent that employees actually participate. Defaults can so easily sway such a significant economic outcome has important implications for understanding the psychology of economic decision making. But it also has important implications for the role of public policy toward saving. Defaults are not neutral—they can either facilitate or hinder better savings outcomes. Current public policies toward saving include examples of both.
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