Wharton Pension Research Council Working Papers

Overpaying and Undersaving: Correlated Mistakes in Retirement Saving and Health Insurance Choices

Adam Leive, Universtiy of Virginia
Leora Friedberg, University of Virginia


Decisions about retirement saving and health plans are among the most important and complicated financial decisions people make in the workplace. It has been established in multiple settings that many employees make mistakes in each of these decisions, and we document that these mistakes are costly in the setting that we investigate. Little is known, however, about mistakes across multiple domains, which may provide opportunities for targeted information interventions or other assistance. We document a significant and substantial positive correlation in mistakes across both important domains. Based on our definitions of mistakes, many employees overpay substantially for health insurance while undersaving for retirement, creating an opportunity to shift resources across domains and improve welfare.


Date Posted: 14 February 2022