Encouraging New Hires to Save for Retirement

This project examines the impact of employer-provided financial education for newly hired workers on contributions to voluntary retirement savings plans. Using administrative data from five large employers, the researchers assess the impact of information and delivery methods on the choice to participate in the plans and the deferral amount selected. The researchers collected additional data from one employer-partner covering the two years before and after their automatic enrollment policy was implemented. Average participation rates increased sharply, while the same fraction of workers took advantage of the full employer match once eligible. The researchers also conducted a survey of newly hired workers. The survey measured employees’ understanding of their company’s voluntary retirement savings plan, their assessment of the employer-provided information, and their reasons for limited or non-participation. Nonparticipants demonstrated lower overall financial literacy relative to participants, and many respondents felt that the information provided by their employers was not sufficient. Finally, the largest employer-partner, BB&T, implemented a field experiment where an on-line mailing was sent to a random subset of non-participating newly hired workers. Younger workers receiving the flyer were significantly more likely to enroll in the 401(k) plan, while older workers actually had lower initiation rates relative to their control group. The research presented provides insights into the efficacy and importance of financial education provided by employers to newly hired workers and how it impacts their retirement saving decisions.