Decision-making approaches and the propensity to default: Evidence and implications

This paper examines heterogeneity in the responsiveness to default options in a large state retirement plan, focusing on individuals’ decision-making approaches as well as their economic and demographic characteristics. Analyses of a survey of plan participants show that procrastination and the need for cognitive closure are important determinants of the likelihood of default. This paper also explores an important implication of defaulting—individuals who default are significantly more likely to subsequently express a desire to enroll in a different plan. The desire to change plans is also correlated with numerous economic and decision-making characteristics, including procrastination.