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Social Security Policy in a Changing Environment$
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Jeffrey R. Brown, Jeffrey B. Liebman, and David A. Wise

Print publication date: 2009

Print ISBN-13: 9780226076485

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226076508.001.0001

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The Importance of Default Options for Retirement Saving Outcomes

The Importance of Default Options for Retirement Saving Outcomes

Evidence from the United States

(p.167) 5 The Importance of Default Options for Retirement Saving Outcomes
Social Security Policy in a Changing Environment
John Beshears

James J. Choi

David Laibson

Brigitte C. Madrian

University of Chicago Press

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.

Keywords:   savings, asset allocation, defaults, public policy, saving plans

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