Overpaying and undersaving: Correlated mistakes in retirement saving and health insurance choices
The complexity of health and retirement benefit plan offerings can make it difficult for employees to make optimal decisions.
Health and retirement benefits can account for a substantial share of employee compensation. Yet, employees often make poor choices when presented with a variety of plan options. This paper examines whether people who make mistakes in choosing a health insurance plan also err in retirement-saving decisions. Understanding the correlation in these mistakes can help employers find ways to improve employees’ benefit choices and financial outcomes.
The authors use four years of administrative data from a large university to study the frequency, magnitude and correlation of mistakes employees make in connection with their health and retirement benefits.