What Will My Account Really Be Worth?

August 2013
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Many investment companies have begun providing their defined-contribution pension participants with individualized, retirement income projections. The U.S. Congress is currently considering whether to require them all to do so. Evidence on the potential impact is scant, though a large body of economic research suggests that individuals are not currently making optimal retirement-saving decisions. Through a field experiment, we measure how provision of retirement income projections along with enrollment information affects individuals’ contributions to employer-sponsored retirement accounts. Using administrative data prior to and following the intervention, we measure the effect on participation and the level of contributions. Those sent retirement income projections were more likely to change their contribution level and they increased annual contributions more than did those who received no intervention. Results from a follow-up survey provide corroborative evidence and show heterogeneous effects of the intervention by rational and behavioral factors known to affect saving. We find that a combination of factors contributed to this treatment effect, including anchoring, which suggests that care is warranted in the design and communication of projections.