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Many people have difficulty making financial decisions. We show
that the quality of two important decisions—health insurance and
retirement saving—are positively correlated using administrative
and survey data. People who choose a dominated health plan are
more likely to forego employer matching funds for retirement saving
than those who do not. On average, choosing a dominated
plan and not contributing to supplemental retirement accounts results
in over $10,000 in foregone savings over five years. Frictions
in acquiring and processing information about benefits are the decisive
factor in 50–75% of choices. Secondary mechanisms involve
liquidity demand, financial literacy, and aversion to deductibles.
