Procrastrination , Present-Biased Preferences, and Financial Behaviors

1. Discussion of Procrastrination, Present-Biased Preferences, and Financial Behaviors Jeffrey R. BrownAlessandro Privetero Arie Kapteyn (USC)

2. What the Authors Do Three admin datasets New employees of University of Illinois (2,764) Procrastinator if signed up for health plan on last day Data from 27 DC plans in 23 firms (155,176) Various measures depending on whether one waited until the last day with health plan selection during one or more years Data from 63 DB plans in 37 firms (27,231) Same measures of procrastination

3. Five outcome measures • Participation in a voluntary supplemental saving plan • How long did it take to sign up • How much contributed as percent of pay • Tendency to stick to default portfolios • Take a lump sum or annuity at exit

4. This is all great • Health plan decisions are logically distinct from the financial decision studied and yet consequential from a financial viewpoint • Results are generally robust and fit in a framework of present biased preferences.

5. Random Observations • R2-s are low (without fixed effects, on the order of .01), so procrastination may not explain a lot of variance (or the measures are noisy). • The coefficients of interest are not always very significant, e.g. for plan contributions, despite 100,000+ observations

6. There always has to be at least one alternative explanation • Could procrastinators be people who find the decisions difficult (note that the education information is noisy)? • Effort of making a decision is larger • More susceptible to framing (annuity or not) • Understand the power of compound interest less • Policy implications would be different presumably.