Behavioral Finance Study: Using Decision Styles to Improve Financial Outcomes
Why every plan needs a “retirement check-up”
Saving for retirement is a long journey, not a one-time event, and there are a lot of choices that go into planning for the future. A plan check-up begins with a diagnosis of how plan participants made their original enrollment decisions or set the starting point of their retirement journey. If participants revisited their original elections and made course corrections, then the most recent elections should be evaluated. However, data suggests that most participants stick to the path of least resistance and rarely revisit their choices.
While it may be difficult to diagnose a person’s decision-making style, new digital measurements have the potential to allow us to slot people into one of these two categories, which we will loosely call instinctive versus reflective. In Using Decision Styles to Improve Financial Outcomes, Shlomo Benartzi, Professor and co-chair of the Behavioral Decision-Making Group at UCLA Anderson School of Management, looks at how decision-making styles influence both the short- and long-term success of a retirement plan.