Contributions to Defined Contribution Pension Plans

NBER Working Paper No. 21467

Issued in August 2015, Revised in October 2015

NBER Program(s):Economics of Aging, Public Economics



Defined contribution (DC) pensions are an increasingly important means of financing retirement consumption. Because individuals often have substantial discretion over how much is contributed to their DC pension, studying DC contribution choices provides general insights into the determinants of individual economic decision-making. The literature has found strong deviations from many predictions of classical frictionless optimizing models. I provide an overview of the U.S. DC pension system and review the literature on the effect of matching contributions, automatic enrollment, active choice deadlines, choice overload, financial literacy, peer effects, mental accounting, and personal experience on individuals’ DC contributions.

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w21467

Published: James J. Choi, 2015. "Contributions to Defined Contribution Pension Plans," Annual Review of Financial Economics, vol 7(1), pages 161-178. citation courtesy of

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