Panel Paper: Promoting Retirement Savings Accounts during Tax Filing: Evidence from a Field Experiment

Saturday, November 9, 2019
Plaza Building: Concourse Level, Plaza Ballroom E (Sheraton Denver Downtown)

*Names in bold indicate Presenter

Stephen Roll, Michal Grinstein-Weiss, Olga Kondratjeva and Sam Bufe, Washington University in St. Louis

Background: Many U.S. households fail to save enough for retirement: In 2013, nearly one-third of U.S. households aged 55 or older said they had neither defined benefit retirement plans (e.g., Social Security) nor retirement savings (U.S. Government Accountability Office, 2015). The issue is more severe among low- and moderate-income (LMI) households (Board of Governors of the Federal Reserve System, 2016) largely because LMI populations tend to have inadequate income and asset levels or they lack access to employer-based retirement plans. In 2015, the U.S. Department of Treasury launched the myRA program, a new retirement account designed primarily for people who lacked access to employer-sponsored retirement plans; myRA charged no fees for account maintenance, funds withdrawals, or account closure. This research explores the potential interest among LMI tax filers in opening and funding myRA retirement accounts at the time of tax filing.

Research Design and Data: We use administrative tax data from a field experiment conducted in 2016 to test how behaviorally-informed interventions implemented during the tax-filing process could promote the myRA program to LMI tax filers and encourage them to deposit their tax refunds into myRA savings accounts. The intervention targeted online TurboTax Freedom Edition (TTFE) tax filers who qualified for the Earned Income Tax Credit or earned $31,000 or less in adjusted gross income. The intervention consisted of two components: (1) a pre-tax season email sent to prior TTFE users providing information on myRA, and (2) interventions within the tax-filing software that invited tax filers to deposit their tax refunds into a myRA when they filed taxes. The email-based part included three treatment conditions with different email interfaces to promote myRA prior to the tax-filing season. The intervention promoting the myRA program within the tax-filing software also included three treatment groups, with messages emphasizing simplicity, convenience, and bigger tax refund next year. In total, 308,987 LMI tax filers participated in the study.

Findings: Within the tax-filing environment, the myRA promotional message emphasizing “bigger refund next year” appeared to be most appealing to LMI tax filers: 3.57% of participants clicked to learn more about myRA in this group compared to 1.69% and 1.60% for the “Simplicity” and “Convenience” groups, respectively. Similarly, 0.57% of tax filers in the “Bigger Refund” group chose to deposit their refund in the myRA account, compared to 0.3% and 0.36% in the “Simplicity” and “Convenience” groups, respectively. Tax filers who had received a pre-tax season myRA email were more interested in learning about myRA compared to those who did not. To put in context, had the most effective treatment—combining pre-tax season emails and “bigger next year’s tax refund” conditions—been shown to all intervention participants, it would have resulted in about 36,000 participants interested in learning more about myRA and 4,000 participants choosing to deposit in myRA.

Significance: While myRA was discontinued in 2017, this study demonstrates the opportunities and challenges to encourage LMI households to invest in retirement savings and promote savings products to LMI households during the tax filing process.