December 11, 2015
Procrastination, How it Can Hurt You
The great Wayne Gretzky is quoted as saying “Procrastination is one of the most common and deadliest of the diseases and its toll on success and happiness is heavy.”
Saving for retirement is a modern-day imperative. What about procrastinators inclines them to place more importance on today’s enjoyment than on preparing for the future? Or in some cases not even thinking about the future? In a recent study, Jeffrey Brown of University of Illinois at Urbana-Champaign asked whether people with this personality trait make different decisions about retirement savings than non-procrastinators and found that they do.
Up to one in five people were identified as procrastinators in the study’s database of more than 155,000 workers at numerous employers. The researchers identified procrastinators in the sample as the people who waited until the final day of open enrollment to choose their health plan from among their employer options. (To separate them from employees who intentionally delayed so they could collect enough information, the researchers looked at how often people used various online employee benefit tools – these strategic delayers were very active; procrastinators were not)
The procrastinators, when confronted with a range of retirement saving decisions, consistently made different decisions.
Some of the results from the study:
Just 7.5 percent of new employees enrolled in at least one of two voluntary retirement plans offered by the University of Illinois – this number looks low but these are supplemental plans for U of I employees, who also have a defined benefit plans. Procrastinators were significantly less likely to enroll – by 2.4 percent – in the supplemental plans, even when the researchers controlled for age.
Of the procrastinators who eventually signed and contributed to 55 company plans also analyzed in this study, they delayed for between 44 days and 85 days longer than non-procrastinators.
Procrastinators also saved 1.3 percent to 2 percent less than the average contribution of 7.2 percent of pay.
In the subset of employers that automatically enrolled their workers, procrastinators were more likely to remain in their employer’s default investment options, such as target date funds, than to make independent choices.
Procrastinators don’t store away as much for the future, because they suffer from a severe case of what economists call “present biased preferences.” This study, however, offered one bright spot: they are very amenable to letting their employers, through defaults, make these decisions for them.
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