Saving for Tomorrow Today: How Message Framing Can Improve Retirement Saving Rates for Younger Workers (Working Paper)

Research Retrieved: July 2017

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Undersaving for retirement is a wide-spread phenomenon in the US, especially for younger employees. Next to the low overall financial well-being of the undersavers, employers might also suffer if there is no broad participation in the offered pension plan. Contributions might need to be paid back to top earners, lowering the pension plan’s quality, employee satisfaction and future chances to employ highly qualified employees. Effective communication can increase savings behaviour and alleviate the problem.

Key Findings

The authors compare abstract, vague communications with concrete, step-by-step guides to examine which is more effective for communicating about pensions. First, they find that younger workers (18-34 years old) increase their intended savings rate more when they receive an abstract, vague communication on how to save for retirement than when they receive an ad with a concrete, step-by-step guideline. Older participants (50-64 years old) do not react differently to the different ads. This is explained by the idea that retirement is a distant, long-term goal for younger workers who therefore prefer more general information. Older workers might have already saved enough for retirement as well.

In the second study, the authors test whether a short-term or a long-term goal increases savings intentions for younger worker. They replicate the first study (within a long-term goal setting, the abstract ad increases savings intentions the most), but do find a better manner of communication. Younger workers increase their savings intention the most when they are presented with a short-term goal (i.e. monthly savings) and a step-by-step guide.


Practical Relevance

Communicating effectively with young pension plan participants is very important for employers and pension plans. Framing of content does matter. This study finds that a concrete communication style with a short-term goal is the most effective for increasing savings intentions.