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  5. Default Options and Retirement Saving Dynamics

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Default Options and Retirement Saving Dynamics

  • Taha Choukhmane
American Economic Review (Forthcoming)

Abstract

Using data from over 100 U.S. retirement plans and a representative U.K. panel, I document the impact of auto-enrollment on retirement savings at different horizons. I replicate the impact of auto-enrollment on participation and contributions in the short–run (at 12 months), but I show that these gains are attenuated over the medium-run (at 36 months). At this longer horizon, the average savings increases are modest, though auto-enrollment significantly lowers inequality in savings. To assess auto-enrollment’s lifetime impact, I estimate a lifecycle consumption-savings model that can fit the observed patterns with a switching cost of approximately $250, smaller than previous estimates.

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