Defaults improve savings

The default 401(k) plan was changed in a United States company, such that employees could choose to opt out rather than opt in. In other words, the default option was to save. Even though there was no change to the economic value of starting a 401(k), participation rates increased from 50% to 86% given automatic enrollment. This effect also reduced differences between demographic groups, which had previously been large. Another key finding is that many participants stuck with the default savings rate, suggesting that not only participation but quantity could be increased by defaults.