Article | Journal of Finance

The Effect of Providing Peer Information on Retirement Savings Decisions

by John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian and Katherine L. Milkman

Abstract

Using a field experiment in a 401(k) plan, we measure the effect of disseminating information about peer behavior on savings. Low-saving employees received simplified plan enrollment or contribution increase forms. A randomized subset of forms stated the fraction of age-matched coworkers participating in the plan or age-matched participants contributing at least 6% of pay to the plan. We document an oppositional reaction: the presence of peer information decreased the savings of nonparticipants who were ineligible for 401(k) automatic enrollment, and higher observed peer savings rates also decreased savings. Discouragement from upward social comparisons seems to drive this reaction.

Keywords: Saving; Decision Choices and Conditions; Retirement;

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Citation:

Beshears, John, James J. Choi, David Laibson, Brigitte C. Madrian, and Katherine L. Milkman. "The Effect of Providing Peer Information on Retirement Savings Decisions." Journal of Finance 70, no. 3 (June 2015): 1161–1201.

About the Author

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John Beshears
Terrie F. and Bradley M. Bloom Associate Professor of Business Administration
Negotiation, Organizations & Markets

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