The Center for Retirement Research at Boston College recently conducted a study to see if income projections affect retirement saving. It looked at 17,000 employees at the University of Minnesota who are more highly educated and have more retirement savings than the national population because they are covered by Social Security and have access to one of two generous employer plans. In addition, they also can contribute to a tax-deferred Voluntary Retirement Plan (VRP).
The experiment tested the effect of providing employees with age-specific projections of the additional retirement income they could get if they were to make additional contributions to a VRP.
The sample population was divided into four groups, a control group and three treatment groups, with each treatment group receiving one of three brochures. The "planning treatment" brochure provided general information on saving for retirement and a step-by-step guide for signing up for or changing contributions to a VRP. The "balance treatment" brochure added age-specific projections of how hypothetical additional contributions would translate into additional balances at retirement. The "income treatment" brochure added age specific projections of how the additional contributions would increase retirement income.
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