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Advances in Psychological Science    2019, Vol. 27 Issue (3) : 418-428     DOI: 10.3724/SP.J.1042.2019.00418
Special Section in Honor of the 2017 Nobel Laureate in Economics Richard H. Thaler |
The nudging role of behavioral economics in retirement savings decisions: Current situation and future prospects
LIU Huan1,2,3,SUI Xiao-Yang2,3,HUANG Yuan-Na2,3,LIN Rong-Ping4,XU Ming-Xing2()
1 Centre for Mental Health, Nanchang University, Nanchang 330031, China
2 CAS Key Laboratory of Behavioral Science, Institute of Psychology, Chinese Academy of Sciences, Beijing 100101, China
3 Department of Psychology, University of Chinese Academy of Sciences, Beijing 100049, China
4 SinSource HR Management Co, Fuzhou 350001, China
5 School of Transportation, Fujian University of Technology, Fuzhou 350118, China
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Abstract  

Richard Thaler was awarded the 2017 Bank of Sweden Prize in Economic Sciences in Memory of Alfred Nobel for his contributions to behavioral economics. Based on bounded rationality, procrastination, loss aversion, and self-control, Thaler proposed the “Save More Tomorrow” plan that nudge employees to save more for their retirement by increasing the amount saved with every salary raised. Starting at the beginning, Thaler suggested that automatic enrollment can be used as the default option for employees to increase 401(k) participation. At the later stage, automatic escalation, which automatically allocates a fraction of the employees’ future pay increase to 401(k) contribution, is proposed to nudge the increase of contribution rates. The SMarT program, which was labeled as libertarian paternalism, can result in not only increased participation and contribution rates, but also the broad diversification of portfolios. The SMarT program profoundly affected policy in England, New Zealand, and other countries in which governments have established policies to make automatic enrollment the default option for employees to participate in retirement savings plan. Researchers have also been inspired to investigate the mechanism of retirement savings behavior. We first analyze the present status given that the three primary sources of retirement income are disproportionate in China. Then, we discuss and suggest nudge methods to incorporate behavioral economic insights, such as default option, framing effect, mental account and manipulating the “two-route loss” to “one-route loss” to promote retirement savings. Improvements to the participation and contribution rates can also be nudged by designing a plan and formulating a policy on retirement savings in China.

Keywords retirement saving      nudge      automatic enrollment      automatic escalation      loss aversion      routes     
ZTFLH:  B849: F08  
Corresponding Authors: Ming-Xing XU     E-mail: xumx@fjut.edu.cn
Issue Date: 22 January 2019
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Huan LIU
Xiao-Yang SUI
Yuan-Na HUANG
Rong-Ping LIN
Ming-Xing XU
Cite this article:   
Huan LIU,Xiao-Yang SUI,Yuan-Na HUANG, et al. The nudging role of behavioral economics in retirement savings decisions: Current situation and future prospects[J]. Advances in Psychological Science, 2019, 27(3): 418-428.
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http://journal.psych.ac.cn/xlkxjz/EN/10.3724/SP.J.1042.2019.00418     OR     http://journal.psych.ac.cn/xlkxjz/EN/Y2019/V27/I3/418
  
  
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