Year: 2007
Type: report
Abstract: In this paper we document the importance of framing effects in the retirement savings decisions of college professors.Pensions in many post-secondary institutions are funded by a combination of an employer contribution and a mandatory employee contribution.Employees can also make tax-deferred contributions to a supplemental savings account.A standard lifecycle savings model predicts a "dollar-for-dollar" tradeoff between supplemental savings and the combined regular pension contributions made on behalf of an employee.Contrary to this prediction, we estimate that each additional dollar of employee contributions leads to a 70 cent reduction in supplemental savings, whereas each dollar of employer contributions generates only a 30 cent reduction.The asymmetry -which is consistent with different "mental accounts" for employer and employee contributions -provides further evidence of the sensitivity of individual savings decisions to the precise details of their pension plan.
DOI: 10.3386/w13275
Authors: David Card, Michael Ransom
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2164650952