ISSN 1671-3710
CN 11-4766/R

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 • Previous Articles     Next Articles

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. 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
  • Received:2018-05-07 Online:2019-03-15 Published:2019-01-22
  • Contact: XU Ming-Xing


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.

Key words: retirement saving, nudge, automatic enrollment, automatic escalation, loss aversion, routes

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