Beruflich Dokumente
Kultur Dokumente
David Laibson
Professor of Economics
Harvard University
National Bureau of Economic Research
June, 2009
Mainstream economics
Psychology + Economics
Survey
Mailed to a random sample of employees
Matched to administrative data on actual savings
behavior
Typical breakdown among 100 employees
Out of
every 100 68 self-report
saving too little 24 plan to
surveyed raise
employees savings rate
in next 2
months
Automatic enrollment
An example: Welcome to the company
If you don’t do anything
–You are automatically enrolled in the 401(k)
–You save 2% of your pay
–Your contributions go into a default fund
Call this phone number to opt out of enrollment
or change your investment allocations
Madrian and Shea (2001)
Choi, Laibson, Madrian, Metrick (2004)
20%
0%
0 6 12 18 24 30 36 42 48
Tenure at company (months)
Employees enrolled under automatic enrollment
cluster at default contribution rate.
Fraction of Participants at different contribution rates:
37%
100%
Active decision
80%
Standard enrollment
60%
40%
20%
0%
0 6 12 18 24 30 36 42 48 54
50% 2005
2004
40%
30%
2003
20%
10%
0%
0 3 6 9 12 15 18 21 24 27 30 33
Time since baseline (months)
13
Another problem:
High fees in 401(k) plans
14
Fourth solution?
Education and Disclosure
Choi, Laibson, Madrian (2007)
15
Data from Harvard Staff
$581
Control Treatment
$516 $518
Fees salient
$494 Fees from
$451 random
allocation
$385 $431
$320
$255 3% of Harvard staff
in Control Treatment
put all $$$
in low-cost fund
16
Data from Harvard Staff
$581
Control Treatment
$516 $518
Fees salient
$494 Fees from
$451 random
allocation
$385 $431
$320
$255 3% of Harvard staff 9% of Harvard staff
in Control Treatment in Fee Treatment
put all $$$ put all $$$
in low-cost fund in low-cost fund
17
$100 bills on the sidewalk
Choi, Laibson, Madrian (2004)
Employer match is an instantaneous, riskless return on
investment
Particularly appealing if you are over 59½ years old
– Have the most experience, so should be savvy
– Retirement is close, so should be thinking about saving
– Can withdraw money from 401(k) without penalty
We study seven companies and find that on average,
half of employees over 59½ years old are not fully
exploiting their employer match
– Average loss is 1.6% of salary per year
Educational intervention has no effect at all
18
Regulators and Plan Designers
Use Defaults to…
Make constructive outcomes automatic or easy
– Enrollment
– High savings rates and escalation of savings
– Diversification
– Rebalancing
– Individualization (e.g. age-based)
– Fee reduction
– Annuitization
Make destructive outcomes hard
Adopt educational interventions but pair them
with simultaneous opportunities for action
Two other psychological biases that are
particularly important in the aftermath of
the financial crisis
1. Return chasing
2. Narrow framing
20
Return chasing in 401(k)’s
22
Passivity and return chasing work
together to produce reallocations:
Equity allocation fell from
67.7% in 2007 to 59.0% in 2008.
Allocation decline is accounted for by a basically
passive response to the decline in equity values
23
Source: Hewitt Associates and author’s calculations.
The danger of narrow framing
Consider a 55-year-old investor:
24
Conclusion
25
0.82
0.84
0.86
0.90
0.92
0.80
0.88
1952.1
1953.4
1955.3
1957.2
1959.1
1960.4
1962.3
1964.2
1966.1
1967.4
1969.3
1971.2
1973.1
1974.4
1976.3
1978.2
1980.1
1981.4
1983.3
1985.2
1987.1
1988.4
1990.3
1992.2
1994.1
US NIPA 1952:1 to 2009:1
1995.4
1997.3
1999.2
1998.1
2001.1
2002.4
Total consumption (C+G) over GDP
2004.3
2006.2
2008.1
2009:1