Wharton Pension Research Council Working Papers


Mingli Zhong

Document Type

Working Paper

Date of this Version



I study the optimal default savings rate in automatic enrollment retirement saving plans. If individuals tend to procrastinate to make an active decision, the optimal default rate should be high to encourage people to opt out of the default. If individuals tend to actively undersave, the optimal default rate should be low to encourage people to stay at the default. Using exogenous increases in the default savings rate in OregonSaves, the first state-sponsored auto-enrollment plan in U.S., I identify individual adherence to the default rate. Using survey data from OregonSaves-eligible workers, I estimate the degree of undersaving if workers actively switch to a non-default rate. Combining individual-level administrative data with survey data, I suggest that the optimal default savings rate 7%.


state-sponsored retirement plans, automatic enrollment, optimal default saving rate, undersaving, inattention

JEL Code

D14, D60, D91, G51, H00

Working Paper Number



Mingli Zhong is a postdoctoral fellow at the National Bureau of Economic Research (NBER).

Copyright/Permission Statement

The opinions and conclusions expressed are solely those of the author and do not represent the opinions or policy of SSA, any agency of the Federal Government, the MRRC, OregonSaves, NBER, or any other institutions with which I am affiliated. Neither the United States Government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of the contents of this report. Reference herein to any specific commercial product, process or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply endorsement, recommendation or favoring by the United States Government or any agency thereof. ©2020 Zhong. All rights reserved.


I am extremely grateful to my advisors Hanming Fang, Benjamin Lockwood, and Olivia S. Mitchell for their guidance and support, and to Mike Abito, Douglas Bernheim, Judd Kessler, Corinne Low, Sendhil Mullainathan, James Poterba, Juuso Toikka, Alex Rees-Jones, Jonathan Reuter, Katja Seim, and Lin Shen for comments and discussions. I also thank participants at the Wharton Applied Economics Workshop and the 21st Annual SSA Research Consortium Meeting for helpful comments. This research was supported by a grant from the US Social Security Administration (SSA) to the Michigan Retirement Research Center (MRRC) as part of the Retirement Research Consortium (RRC). Support was also provided by the AARP; the Pew Foundation; the Pension Research Council/Boettner Center of the Wharton School at the University of Pennsylvania; and the Quartet program at the University of Pennsylvania. I thank many individuals from the OregonSaves program for numerous discussions and insights into the OS program, and Yong Yu as well as Wenliang Hou for excellent research assistance.

Included in

Economics Commons



Date Posted: 08 January 2020