Found 14 article(s) for author 'David Laibson'

Building Emergency Savings Through Employer-Sponsored Rainy Day Savings Accounts

Building Emergency Savings Through Employer-Sponsored Rainy Day Savings Accounts. John Beshears, David Laibson, October 2017, Paper, “Many Americans live paycheck to paycheck, carry revolving credit balances, and have little liquidity to absorb financial shocks (Angeletos et al. 2001; Kaplan and Violante 2014). One consequence of this financial vulnerability is that many individuals use a portion of their retirement savings during their working years. For every $1 that flows into 401(k)s and similar accounts, between 30¢ and 40¢ leaks out before retirement (Argento, Bryant, and Sabelhaus 2015). We explore the practical considerations and challenges of helping households accumulate liquid savings that can be deployed when urgent pre-retirement needs arise. We believe that this can be achieved cost effectively by automatically enrolling workers into an employer-sponsored payroll deduction “rainy day” or “emergency” savings account, and present three specific implementation options.Link

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Does Aggregated Returns Disclosure Increase Portfolio Risk Taking?

Does Aggregated Returns Disclosure Increase Portfolio Risk Taking? David Laibson, Brigitte Madrian, August 11, 2016, Paper, “Many experiments have found that participants take more investment risk if they see returns less frequently, see portfolio-level returns (rather than each individual asset’s returns), or see long-horizon (rather than one-year) historical return distributions. In contrast, we find that such information aggregation treatments do not affect total equity investment when we make the investment environment more realistic than in prior experiments. Previously documented aggregation effects are not robust to changes in the risky asset’s return distribution or the introduction of a multi-day delay between portfolio choice and return realization.Link

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Why Harvard’s Laibson and MIT’s Schoar back Labor Department’s ‘fiduciary rule’ for retirement savings

Why Harvard’s Laibson and MIT’s Schoar back Labor Department’s ‘fiduciary rule’ for retirement savings. David Laibson, September 30, 2015, Video. “The Obama administration has stirred controversy – and stiff industry criticism – for a pending Labor Department rule that would toughen rules governing retirement-finance advisers, requiring nearly all of them to put clients’ best interest first (“the fiduciary standard.”) Currently, stock brokers, among others, are required only to be sure recommended investments are ‘suitable’ for their clients.” SCROLL DOWN PAGE FOR VIDEO.  Link

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Self Control and Commitment: Can Decreasing the Liquidity of a Savings Account Increase Deposits?

Self Control and Commitment: Can Decreasing the Liquidity of a Savings Account Increase Deposits? John Beshears, David Laibson, and Brigitte Madrian, August 2015, Paper. “If individuals have self-control problems, they may take up commitment contracts that restrict their spending. We experimentally investigate how contract design affects the demand for commitment contracts. Each participant divides money between a liquid account, which permits unrestricted withdrawals, and a commitment account with withdrawal restrictions that are randomized across participants. When the two accounts pay the same interest rate...” Link

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Principles of (Behavioral) Economics

Principles of (Behavioral) Economics. David Laibson, 2015, Paper. “Behavioral economics has become an important and integrated component of modern economics. Behavioral economists embrace the core principles of economics—optimization and equilibrium—and seek to develop and extend those ideas to make them more empirically accurate. Behavioral models assume that economic actors try to pick the best feasible option and those actors sometimes make mistakes. Behavioral ideas should be incorporated throughout the first-year undergraduate course. Instructors should also considering allocating a lecture (or more)…” Link

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The Effect of Providing Peer Information on Retirement Savings Decisions

The Effect of Providing Peer Information on Retirement Savings Decisions. John BeShears, David Laibson, Brigitte C. Madrian, November 14, 2013, Paper. “Information about peer behavior can influence a person’s choices. We conducted a field experiment in a 401(k) plan to measure the effect of peer information on savings choices. Low-saving employees were sent a simplified plan enrollment or contribution increase form. A randomized subset of forms included information about the fraction of age-matched…” Link

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Who uses the Roth 401(k) and how do they use it?

Who uses the Roth 401(k) and how do they use it? David Laibson, Brigitte C. Madrian, July 2013, Paper. “Using administrative data from twelve companies that added a Roth 401(k) option between 2006 and 2010, we describe the characteristics of Roth contributions. Approximately one year after the Roth is introduced, 9% of 401(k) participants have positive Roth balances. Roth participation is more than twice as high among 401(k) participants who were hired after the Roth introduction than among 401(k) participants who were hired before the Roth introduction. In essence, once an employee joins a 401(k)…” Link verified August 21, 2014

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What Makes Annuitization More Appealing?

What Makes Annuitization More Appealing? David Laibson, Brigitte C. Madrian, May 11, 2013, Paper. “We conduct and analyze two large surveys of hypothetical annuitization choices. We find that allowing individuals to annuitize a fraction of their wealth increases annuitization relative to a situation where annuitization is an “all or nothing” decision. Very few respondents choose declining real payout streams over flat or increasing real payout streams of equivalent expected present value. Highlighting the effects of inflation increases demand for cost of living adjustments. Frames that highlight flexibility, control, and investment…” Link verified August 21, 2014

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Optimal Mortgage Refinancing: A Closed Form Solution

Optimal Mortgage Refinancing: A Closed Form Solution. David Laibson, March 17, 2013, Paper. Households in the US hold $23 trillion in real estate assets. Almost all home buyers obtain mortgages and the total value of these mortgages is $10 trillion, exceeding the value of US government debt. Decisions about mortgage refinancing are among the most important decisions that households make. Borrowers refinance mortgages to change the size of their mortgage and/or to take advantage of lower borrowing rates. Many authors have calculated the optimal refinancing differential when the household is…” Link verified August 21, 2014

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