Can Evaluative Structures Assist Retirement Saving Decisions?

Abstract

People save too little for their retirement. One reason for this could be that numerical retirement income projections (e.g. $2,487 per month) might hinder understanding of the consumption consequences of saving rate decisions. To address this issue, we conducted three experiments to assess how evaluative structures in the form of labels describing expected future consumption outcomes (e.g., “moderate” or “comfortable” lifestyles) and baskets (consumption possibilities per lifestyle) affect saving decisions. We find that, compared to numerical information, these evaluative structures lead to higher saving rates, but they work through different mechanisms. Labels increase savings through upward anchoring, whereas labels accompanied by baskets increase savings through both upward anchoring and enhanced mental imagery of future outcomes. Labels with consumption baskets are thus more effective at supporting individuals’ thoughtful choice. We do not find evidence of potential negative consequences of evaluative structures, such as downward anchoring, threshold effects, or satiation effects. We provide practical guidelines for implementing evaluative structures in the retirement savings context.

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