Digital enrollment architecture and retirement savings decisions: Evidence from the field

Increasingly, U.S. employees are being asked to assume responsibility for saving for retirement through employer-sponsored 401(k) retirement plans. Unfortunately, a large share of Americans are under-saving, and expected to be unprepared for retirement. Recent work from behavioral scientists provides evidence that choice architecture and default effects can play a powerful role in improving retirement savings choices. Despite employees’ frequent use of digital devices to make initial enrollment decisions, there is a comparative lack of evidence regarding the impacts of digital design interfaces on retirement choices. This thesis presents new evidence from three large-scale field studies which document how employees respond to aggressive plan defaults, and small scale changes to the design of online enrollment interfaces. Chapter 1 presents evidence that aggressively set defaults (7% to 10%) result in increased contribution rates, without decreasing employee enrollment, relative to conventional (6%) default rates. Chapter 2 documents that higher planned escalator rates (of 2% or 3%) increase contribution rates, without adversely impacting enrollment. Finally, Chapter 3 presents evidence that employees’ initial enrollment decisions may be heavily influenced by non-economic features, including the use of visual elements like color, the standardization of language, and the salience of previously disclosed plan details. The studies in this thesis identify three distinct strategies that policymakers and employers can use to encourage higher savings.