Wharton Pension Research Council Working Papers
 

Title

How Much Choice is Too Much?: Contributions to 401(k) Retirement Plans

Document Type

Working Paper

Date of this Version

1-1-2003

Abstract

Although extensive choice seems appealing, research shows that it may hinder motivation to buy and decrease subsequent satisfaction with purchased goods. This paper examines whether these findings generalize to employees who are making decisions about whether to invest in 401(k) retirement saving plans. Using data from nearly 800,000 employees, we tested the hypothesis that employee 401(k) participation rates fall as the number of fund options increase. Our results confirm that participation in 401(k) plans is higher in plans offering a handful of funds, as compared to plans offering ten or more options.

Comments

The published version of this Working Paper may be found in the 2004 publication: Pension Design and Structure: New Lessons from Behavioral Finance.

Working Paper Number

WP2003-10

Copyright/Permission Statement

©2003 Pension Research Council of the Wharton School of the University of Pennsylvania. All Rights Reserved

Acknowledgements

We acknowledge the contributions of Steve Utkus, who made available the data essential for conducting this analysis and who provided us constructive feedback throughout the process. We would also like to thank Gary Mottola for the considerable time and effort he dedicated to assisting us in refining and analyzing the data set.

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Date Posted: 04 September 2019