Thirty years ago, most American employees could rely upon a pension to cover 60% of their retirement expenses - the other 40% coming from Social Security. But the shift from paternalistic to self-directed retirement saving has resulted in decreased financial
security. Americans often end up postponing savings for reasons including fear of being too far behind to catch up, anxiety, and feeling overwhelmed by the complicated decisions.
Our study used theories of behavioral economics and principles of choice architecture to test the hypothesis that pre-set choices of prescribed savings rates and simple investment options could get employees to start saving earlier, and save more at the same time.
Study results showed that “packaging” complicated investment and savings choices would entice employees to contribute a significantly higher percentage of their salary to savings. Post launch metrics show that indeed, new-hires are contributing a larger portion of their paychecks to retirement savings.