The Impact of Presentation and Information on the Take - up of Financial Incentives for Retirement Saving

A growing body of evidence shows that individuals respond not only to the pure economic incentives they face but also to the manner in which such incentives are presented and framed. Such behavior appears to be particularly relevant in analysis of saving choices. Brigitte C. Madrian and Dennis F. Shea (2001), for example, show that changing the default rules for 401(k) enrollment has a significant impact on employee participation rates. Esther Duflo and Saez (2002) show that the behavior of one’s colleagues has a significant causal influence on workers’ participation in 401(k) plans. Marianne Bertrand et al. (2005) show that changes in the wording of a loan offer have a significant effect on borrowers’ choices. Duflo et al. (2006) used experimental data covering 14,000 tax filers at 60 H&R Block tax preparation offices in St. Louis in 2005, and showed that the matching of IRA contributions can significantly raise take-up and contributions. Raising the match rate from 0–20 percent to 50 percent raised IRA take-up from 3–8 percent to 14 percent. We also showed, using nonexperimental difference-in-difference analysis, that increasing the effective match rate in the federal saver’s credit from 25 percent to 100 percent raised take-up by at most 1.3 percentage points. Contributions to retirement accounts, conditional on take-up, were also significantly more sensitive to