Proceedings of The 11th International Conference on Research in Behavioral and Social Sciences
Everyone Else is Making a Mistake: Effects of Peer Error on Saving Decisions
Many studies have found that social influence affects people’s choices, but its effect on financial decisions has been less conclusive. This paper explores whether letting people know about the mistakes of others is effective. We describe three randomized retirement interventions among a total of nearly 10,000 federal employees. The first two encouraged those not saving enough to get their full match (e.g., saving too little) to increase contributions. Roughly one-third of participants were informed of how much other people in the same position had missed in matching on average. After three months, those who received this peer information were more than twice as likely to increase their contributions compared to those who received no outreach (p < 0.0001). The third intervention encouraged employees on track to reach the annual IRS limit for retirement saving early (e.g., saving too much) to reduce their contributions and, in turn, avoid missing matching. Those who were told what their peers had missed were approximately 29% more likely to successfully adjust their contributions (p < 0.01). Results raise interesting questions about the nuances of social influence in financial contexts.
keywords: Behavioral science, financial decision-making, peer influence, retirement saving,Retirement contributions