Retirement savings: a tale of decisions and defaults

Loretti Isabella Dobrescu, Xiaodong Fan, Hazel Bateman, Ben Rhodri Newell, A. Ortmann, Susan Thorp

Research output: Contribution to journalArticleResearchpeer-review

8 Citations (Scopus)

Abstract

This study develops a structural dynamic life-cycle model to examine the behavior of members of an industry-wide pension fund to assess both the prevalence of defaults and their impact on retirement savings. We estimate the model using the simulated method of moments on administrative data from a large Australian pension fund. Our results show that default settings strongly influence wealth accumulation. Such settings are also highly persistent, both over time and across decisions. Overall, the findings suggest that if defaults (particularly the irreversible ones) are not carefully designed, retirement savings can be severely affected.

Original languageEnglish
Pages (from-to)1047-1094
Number of pages48
JournalThe Economic Journal
Volume128
Issue number610
DOIs
Publication statusPublished - 1 May 2018
Externally publishedYes

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