Beshears, John, James J. Choi, David Laibson, and Brigitte C. Madrian. "Potential vs. Realized Savings under Automatic Enrollment." TIAA Institute, July 2018.


We studied the effect of automatic enrollment on savings plan loans and withdrawals and their implications for the evolution of retirement plan balances over time by examining the experience of a large Fortune 500 company in the financial services sector that introduced automatic enrollment at a 2% default contribution rate for all employees hired on or after July 1, 2005.Our empirical strategy compares savings plan outcomes for employees hired in the 12 months after the introduction of automatic enrollment to those for employees hired in the 12 months prior. We restrict our analysis to those employees in both cohorts who remained at the firm for at least one year and then follow these two cohorts for up to eight years after they joined the firm. We first examine outcomes directly observable in administrative data: savings plan participation, contributions, balances, outstanding loans, and whether plan withdrawals are rolled over into another qualified savings plan or not. We then project the potential impact that automatic enrollment could have on retirement savings accumulations if there were no plan leakage and decompose that amount into several component parts—retirement plan balances, outstanding loan balances, rollovers into other qualified plans, and non-rollover withdrawals—to quantify the extent to which leakage reduces retirement asset accumulation overall, and the incremental asset accumulation induced by automatic enrollment in particular.