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Target Date Defaults in a Public Sector Retirement Saving Plan
Author(s) -
Clark Robert L.,
Mitchell Olivia S.
Publication year - 2020
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.1002/soej.12415
Subject(s) - default , business , seniority , equity (law) , public sector , asset allocation , investment (military) , government (linguistics) , asset (computer security) , finance , labour economics , public economics , economics , portfolio , linguistics , philosophy , economy , computer security , politics , political science , computer science , law
Little is known about whether employee retirement saving patterns change when public sector employers implement Target Date Funds (TDFs) as the default plan investment. We use administrative and survey data from a large government entity to track participation, contributions, and asset allocation impacts of TDF introduction. We show that those mapped into TDFs did not alter their holdings so that the reform resulted in higher equity shares, especially for women, younger workers, and low‐seniority employees. The least risk‐tolerant and financially literate employees held 12 percentage points more equity than previously. Moreover, defaulting public employees into TDF had a profoundly sticky effect on their subsequent investment behavior.