Saving for retirement is important so that people have enough money to live comfortably once they stop working. Yet, fewer than half of eligible DC government employees save money through their retirement benefit plan. Through a randomized evaluation, we tested whether sending an email—designed with insights from behavioral science—can increase how much employees save for retirement. While there were no new retirement plan enrollments in response to the email, employees who were already enrolled were 31% more likely to increase how much they saved if they received our email. If we had sent our email to all enrolled employees, 535 more would have increased their retirement savings.
On their first day working for the District government, new employees attend orientation where they hear from DCHR Director Ventris C. Gibson (pictured), learn about retirement benefits, and more. (Credit: DCHR)
Why is this issue important in DC?
Fewer than half of eligible DC government employees save money for retirement through a 457(b) Deferred Compensation Plan. People who do not save for retirement may not have enough money to support themselves later in life. In 2016, DC employees reported that their largest obstacles to enrollment were: procrastination, not knowing whether or how much to invest, not knowing how to enroll, and not having enough money to save.1
What did we do?
In collaboration with the DC Department of Human Resources (DCHR), we designed an email campaign with insights from behavioral science to encourage employees’ to contribute to their retirement plan. We based the emails on evidence that 1) framing future gains as more immediate; and 2) simplifying employees’ decisions may prompt them to enroll in retirement plans and save more once they are enrolled.2 In January 2018, we sent our email to 22,846 randomly-selected DC government employees; the remaining 11,422 employees did not receive our email.
What have we learned?
After two pay periods, no employees completed new enrollments in the retirement program whether or not they received an email. This suggests that employees rarely start contributing to their retirement plans after they are first hired. Employees who were already enrolled in the retirement program, however, were 31% more likely to increase how much they saved after we sent than an email. If we had sent our email to all eligible DC government employees, that translates to a total of 535 employees saving more for their futures—from just a single email.
“Like other workers across the country, many District government employees are not adequately prepared for retirement, having limited or no funds to supplement their retirement income once they make that crucial decision to retire.”
What comes next?
These findings may help DCHR decide how to encourage existing DC government employees to save for retirement or how to encourage new employees to save more. In July 2019, DCHR started automatically enrolling new employees into a retirement plan, with the option to opt-out whenever they want, based on evidence that automatic enrollments are effective in improving employee participation rates in retirement savings plans.
What happened behind the scenes?
A number of the research insights we used to design the emails are also used by scammers. This became clear when at least one DC government employee reported our email to network security as a phishing scam. Fortunately, the security team knew the email was from DCHR because we told them about it in advance.
1 PRM Consulting Group, Inc (2016).
2 Beshears, Choi, Laibson and Madrian (2013), Hershfield et al (2011), NBER (2016)
3 B2200068 - Deferred Compensation Program Enrollment Act of 2017.