Wharton Pension Research Council Working Papers

Document Type

Working Paper

Date of this Version



Not everyone makes wise financial choices. A large body of research documents behavior inconsistent with well-informed consumers maximizing their expected utility of consumption. It remains unknown, however, whether such behavior is correlated across domains. This paper uses two novel datasets to test whether the quality of health insurance and retirement saving decisions are correlated. Using administrative panel data from a large employer, we find that people who overpay for health insurance by choosing a dominated plan are more likely to forego employer matching funds for retirement saving. One-third of employees overpay for health insurance each year by $1,700 and simultaneously make no voluntary retirement contributions. Over just a few years, these choices result in lost savings equal to 4% of the median net worth of families at retirement. The losses are highest for employees with lower salaries, lower educational attainment, and for women. We find this positive correlation in choice quality across domains generalizes to other settings using a survey linked to administrative data on retirement accounts from 10 employers. This finding suggests consumers could reallocate funds from health insurance to retirement saving without sacrificing consumption. We find empirical support for several mechanisms explaining choice quality and consider implications for policy design to improve household economic security.


financial education, financial literacy, retirement savings, health plans

JEL Code

D14, D81, G5, I13

Working Paper Number



This project received funding from the TIAA Institute and the Wharton School’s Pension Research Council/Boettner Center, and from the UVA Bankard Fund for Political Economy.

Copyright/Permission Statement

The content is solely the responsibility of the authors and does not represent official views of the above-named institutions.


We thank Randy Ellis, Tal Gross, Lorens Helmchen, Lauren Jones, Tim Layton, Mario Macis, Bill Skimmyhorn, and seminar participants at BU/Harvard/MIT Health Economics, Columbia University Health Policy & Management, George Mason University Microeconomics Policy, University of Wisconsin-Madison Risk & Insurance, UVA, the Junior Household Finance Brownbag, Southeastern Health Economics Study Group, TIAA Institute, ASHEcon, and NTA meetings for helpful comments. Wenqiang Cai, Yutong Chen, David Li, Alex Sheng, Rudrajit Sinha, and Jiafeng Wu provided excellent research assistance.

Included in

Economics Commons



Date Posted: 14 February 2022