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  5. Efficiency in Household Decision Making: Evidence from the Retirement Savings of U.S. Couples

American Economic Review

ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)

Efficiency in Household Decision Making: Evidence from the Retirement Savings of U.S. Couples

  • Taha Choukhmane
  • Lucas Goodman
  • Cormac O'Dea
American Economic Review (Forthcoming)

Abstract

We study how couples allocate retirement-saving contributions across each spouse’s account. In a new dataset covering over a million U.S. individuals, we find retirement contributions are not allocated to the account with the highest employer match rate. This lack of coordination— which goes against the assumptions of most models of household decision-making—is common, costly, persistent over time, and cannot be explained by inertia, auto-enrollment, or simple heuristics. Complementing the administrative evidence with an online survey, we find that inefficient allocations reflect both financial mistakes as well as deliberate choices—especially when trust and commitment inside the households are weak.

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