Deepening our Understanding of Savings Automation in Retirement and Non-retirement Contexts
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retirement savings
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Twenty years of research focusing on retirement savings demonstrate that automating components of the savings process can increase participation in retirement plans, contribution rates, and balances. We review the literature on these benefits and the potential negative consequences of automation, such as reduced liquidity. We also highlight areas of examined and unexamined heterogeneity, including prior work on the relationships among time preferences, savings automation, and financial health. Recent policies like the SECURE 2.0 Act of 2022 and a growing number of state auto-IRA programs are encouraging greater automation of both retirement savings and liquid emergency savings, and may provide new avenues for understanding the impacts of savings automation. We conclude by calling on researchers to further explore non-retirement and retirement savings automation, longitudinal outcomes of retirement success, and potential social wealth inequalities exacerbated by automation in employer plans.
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This paper was prepared by staff of the Office of the Investor Advocate at SEC but does not necessarily reflect the views of SEC, the commissioners, or other members of the staff. The reported research was done independently from, and does not represent, the views of any of the authors' affiliations. All findings, interpretations, and conclusions of this paper represent the views of the authors and not those of the Wharton School or the Pension Research Council. © 2024 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.