| Course | FIN 405 Behavioral Finance (FIN/405) |
|---|---|
| Week | 5 |
| Paper type | Applied behavioral finance paper |
| Length | about 1,053 words, 4 double-spaced pages plus title page and references |
| Format | APA 7 student paper |
| School | University of Phoenix |
| Program | BS in Finance |
| Updated | October 2026 |
Free sample paper for FIN 405 Week 5
Designing Advice for How People Actually Decide: Defaults, Commitment, Framing and Forecast Discipline in a Credit Union's New Retirement Service
[Student Name]
University of Phoenix
FIN/405: Behavioral Finance
Week 5 Assignment
[Instructor Name]
[Date]
The credit union, its members and the service design are composites written for a model paper; research findings come from the sources listed.
Desert Sky Credit Union, a composite institution in Arizona with 140,000 members, found in a member survey that 46 percent of working members had less than $10,000 saved for retirement and that most of them said they intended to start saving soon. Many worked for small employers without retirement plans. The credit union decided to launch a retirement advice service and an individual retirement account program. Its board asked for a design based on evidence about how people actually behave. Members did not need to be told that saving matters; they needed a path that made saving the easy choice instead of the one they kept postponing. This paper designs that path.
The Problem Is Behavior, Not Knowledge
Earlier weeks showed that people procrastinate, weigh losses heavily, check accounts too often and follow the path of least resistance. A service built only on education assumes that knowing what to do leads to doing it. The research on retirement saving shows that design choices change behavior more reliably than information.
Making Saving the Default
Madrian and Shea (2001) examined what happened when one large employer made 401(k) enrollment automatic for new hires. Participation among new employees rose from 37 percent under the old opt-in system to 86 percent, and many stayed at the default contribution rate and investment. The finding showed the power of defaults and also their risk: a low default rate can anchor people at too little saving. For the credit union, which cannot enroll members through employers, the closest equivalent is an account opening process in which a monthly transfer from checking is preselected at 6 percent of the member's direct deposit, with a single step to change or decline it.
Saving More Tomorrow
Thaler and Benartzi (2004) designed a program in which employees committed in advance to raise contributions with each future pay increase. Because the increase came with a raise, take-home pay never fell, avoiding the sense of loss. In the first implementation, participants' average saving rate rose from 3.5 percent to 13.6 percent over about four years. The credit union will offer members an automatic increase of one percentage point each January, timed to typical annual raises, with a reminder in December and an easy way to pause.
How Often Members See Results
Benartzi and Thaler (1995) explained the equity premium puzzle partly through myopic loss aversion: investors who evaluate their portfolios often see more losses and choose less risk than their horizons justify. The service will show members their retirement balances quarterly by default, with a projection of monthly retirement income rather than a dollar balance, and will present returns over rolling five-year periods alongside the latest quarter. Members can still check daily, but the default frame emphasizes the horizon that matters.
Naming the Goal
Mental accounting, the tendency to sort money into separate categories with separate rules, can work in a saver's favor. Money labeled for a specific purpose is less likely to be spent. Each member's retirement account will carry a name chosen by the member, such as a retirement age or a personal goal, and the app will show progress toward an income target rather than toward an abstract number.
Talking With Members During Declines
The service will prepare members before declines occur, as the Week 1 case recommended. At enrollment, members will see what a 30 percent stock decline would mean in dollars for their account and in monthly retirement income, and they will choose a target-date fund whose stock share declines with age. During a decline, the credit union will send a brief message reminding members of their plan, rather than market commentary.
Debiasing the Credit Union's Own Forecasts
Behavioral insights apply to the organization as well. The credit union projected that 18,000 members would open accounts in the first year. That figure came from the planning team's enthusiasm and from anchoring on the survey's stated intentions. Forecasters tend to be overconfident and optimistic, especially about their own projects. A better method starts from a reference class: what share of members actually adopted similar new products at comparable credit unions, typically a few percent in the first year. Starting from that base rate and adjusting for the default design gave a more realistic projection of about 8,000 accounts, which changed the staffing and budget plan.
Communicating Risk in Plain Numbers
How risk is described changes how people respond to it. Research on risk communication shows that people understand frequencies and dollar amounts better than percentages and probabilities. The credit union will therefore describe the target-date fund's risk as a range of outcomes in dollars: for a member contributing $200 a month for 25 years, the projected balance at retirement and the balance in a poor outcome, such as the worst one in ten historical periods. It will avoid vague labels like moderate risk, which members interpret very differently. Advisors will also show the cost of waiting, for example how much less a member would have at 67 if saving began five years later. Concrete numbers make the future self more vivid, which research on present bias suggests helps people save.
Measuring Success
The credit union will track the share of eligible members enrolled, average contribution rates, the share accepting automatic increases, opt-out rates, the share of members who stopped contributing during a market decline and account balances against projected needs. It will test design variations, such as default contribution levels, with randomly assigned groups so that results reflect the design rather than member differences.
Ethical Limits
Defaults and framing influence choices, so they carry responsibility. The design keeps every option open, discloses the defaults plainly and sets them at levels that benefit members, not the credit union's revenue. Members who cannot afford to save, for example those carrying high-interest debt, will be advised to pay that debt first, and the default transfer will not apply to members whose balances fall below a set level.
Conclusion
A retirement service designed for how people actually behave uses defaults, automatic increases, longer evaluation frames, named goals and preparation for declines. The same insights correct the credit union's own optimistic forecast. Measured outcomes and clear ethical limits make the design both effective and fair to members.
References
Benartzi, S., & Thaler, R. H. (1995). Myopic loss aversion and the equity premium puzzle. The Quarterly Journal of Economics, 110(1), 73-92. https://doi.org/10.2307/2118511
Madrian, B. C., & Shea, D. F. (2001). The power of suggestion: Inertia in 401(k) participation and savings behavior. The Quarterly Journal of Economics, 116(4), 1149-1187. https://doi.org/10.1162/003355301753265543
Thaler, R. H., & Benartzi, S. (2004). Save More Tomorrow: Using behavioral economics to increase employee saving. Journal of Political Economy, 112(S1), S164-S187. https://doi.org/10.1086/380085
What the FIN 405 Week 5 instructions ask
The closing FIN 405 assignment typically asks students to apply what the course has covered to a practical problem: how advisors, firms or policymakers can use behavioral insights to help people decide better, or how forecasters can reduce bias in their own predictions. Common requirements include choice architecture and nudges, defaults, commitment devices, framing of risk and return, communication during market declines, and biases in analyst and economic forecasts such as overconfidence, optimism and anchoring. Many versions ask for a plan or proposal with steps and measures. Students should tie every recommendation to research, address ethical questions about influencing choices and use APA format.
How this FIN 405 Week 5 example is built
A credit union starting a retirement service gives every behavioral finding a design decision to shape. The paper opens with the problem: members who know they should save but do not. Defaults and automatic increases are justified by the research that tested them. Framing decisions follow, including how often members see their balances and how risk is described. Mental accounting suggests linking savings to named goals. The paper then turns to the credit union's own forecasts and the biases that distort them, proposing a reference class check. Measurement and ethics complete the design, ensuring the service can be judged on outcomes and respects members' freedom to choose.
FIN 405 Week 5 grading rubric: where the points go
High marks in this last week tend to go to papers that turn research into specific, workable recommendations. Instructors look for each design choice linked to a study that tested it, for attention to both individual advice and the organization's own forecasting, and for a plan that says how success will be measured. Discussion of ethical limits, such as the difference between helping and manipulating, earns credit, especially when the paper sets defaults at levels that serve the people affected. Papers that synthesize earlier course topics, such as loss aversion and overconfidence, show integration of the course. Clear structure, realistic numbers and APA references to the original studies complete the grade.
FIN 405 Week 5 help: mistakes to avoid
Papers on the final FIN 405 assignment often fall short by listing behavioral concepts again instead of applying them. Every section should end in a decision about design or practice. Another gap is citing a nudge without the evidence that it worked; name the study and its result. Students also forget measurement. Say what data will show success. Avoid presenting nudges as cost free or always benign; discuss consent, transparency and the right to opt out. Address forecasting if the prompt includes it. Keep recommendations within what the organization can actually do. Finally, connect the plan to at least two concepts from earlier weeks, such as loss aversion or overconfidence, so the paper reads as the end of the course.
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FIN 405 Week 5 questions, answered
What does FIN 405 Week 5 usually cover?
It usually covers applying behavioral finance to advice and forecasting, including defaults, commitment devices, framing, communication during declines, mental accounting and reducing overconfidence and optimism in forecasts.
Where can I find a free FIN 405 Week 5 sample paper?
A full design for a credit union retirement service built on behavioral research, with comments on each choice in the margin, is posted on this page, free to read. Tell us about your own organization and we will write the opening draft free.
What is a default in behavioral finance?
The option that takes effect if a person makes no active choice. Because people tend to stay with defaults, setting a helpful default, such as automatic enrollment, changes outcomes greatly.
What is myopic loss aversion?
The combination of loss aversion and frequent evaluation. Investors who check results often see more losses and, feeling them strongly, choose less risky assets than their long horizons justify.
How can forecasters reduce bias?
By starting from the record of similar past projects or forecasts, the reference class, before adjusting for specifics, and by tracking their own accuracy over time to correct optimism and overconfidence.
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