Procrastination in Preparing for Retirement

Investing for retirement is one of the most important tasks of a person’s life, and yet many people do a very poor job. This paper argues that a plausibly important source of poor performance is procrastination. We present a simple model and calibration exercises showing how a person who naively procrastinates due to a time-inconsistent taste for immediate gratification may put off investigating, or implementing, superior investment strategies. Even when the person knows that the benefits of finding a superior investment enormously outweigh the short-term effort costs, she may significantly procrastinate because she repeatedly plans to put in the effort soon. We conclude by discussing some policies that might be used to influence the savings behavior of procrastinators, with an emphasis on policies aimed at default options and short-term incentives that do not significantly alter long-term incentives.

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