Abstract: We experimentally examined the effects of risk compensation on simulated 401(k) retirement plan contribution and allocation decisions. Risk compensation is a modification of individual behavior, in response to a safety improvement mechanism, such that one actually mitigates much of the potentially risk-minimizing benefit. While risk compensation effects have been demonstrated in many activities involving risk, the effects have not previously been investigated in retirement-related decisions. In recent years, however, 401(k) plan participants, administrators, sponsoring companies, and government officials have shown an increasing interest in improving retirement plan decision-making. The results suggest significant risk compensation effects for both contribution level and allocation decisions. When participants were presented with information about apparent risk-reducing safety mechanisms associated with the inherently riskier stock investments, they indicated that they would contribute more to their retirement accounts and would allocate more of their contributions to the riskier stock investment alternative. We discuss the implications of these findings for employee 401(k) decision-making behavior. We also suggest directions for future research that can further examine risk compensation effects in employee 401(k) decision-making.