Elderly individuals exhibit wide disparities in their sources of income. For those in the bottom half of the income distribution, Social Security is the most important source of support; program ...changes would directly affect their well-being. Income from private pensions, assets, and earnings are relatively more important for higher-income elderly individuals, who have more diverse income sources. The trend from private sector defined benefit to defined contribution pension plans has shifted responsibility for retirement security to individuals. A significant subset of the population is unlikely to be able to sustain their standard of living in retirement without higher pre-retirement saving.
► We examine the relationship between financial knowledge and retirement planning in the Netherlands. ► We provide evidence of widespread illiteracy. Financial literacy is strongly related to ...economics education in school. Many households do not plan for retirement. ► Financially knowledgeable households are more likely to think about retirement. ► We show that the causality goes from financial literacy to planning rather than the other way around.
The complexity of financial decisions that households now face has increased to unprecedented levels. At the same time, households seem to lack the financial knowledge to cope with these decisions, including how to save and invest adequately for retirement. In this paper, we examine the relationship between financial knowledge and retirement planning in the Netherlands. For this purpose, we have designed a module on financial literacy and planning for the De Nederlandsche Bank (DNB) Household Survey. We find a strong and positive relationship between financial knowledge and retirement planning; those who are more financially knowledgeable are more likely to plan for retirement. Using information on economics education acquired in school, we show that the nexus of causality goes from financial literacy to planning rather than the other way around.
Using a field experiment in a 401(k) plan, we measure the effect of disseminating information about peer behavior on savings. Low-saving employees received simplified plan enrollment or contribution ...increase forms. A randomized subset of forms stated the fraction of age-matched coworkers participating in the plan or age-matched participants contributing at least 6% of pay to the plan. We document an oppositional reaction: the presence of peer information decreased the savings of nonparticipants who were ineligible for 401(k) automatic enrollment, and higher observed peer savings rates also decreased savings. Discouragement from upward social comparisons seems to drive this reaction.
This paper investigates the mechanisms behind the health effects of retirement. Using a Regression Discontinuity Design to exploit financial incentives in the German pension system for ...identification, I find that retirement improves subjective health status and mental health, while also reducing outpatient care utilization. I explore a wide range of health behaviors, time use, and effect heterogeneity as potential mechanisms. Relief from work-related stress and strain, increased sleep duration as well as more frequent physical exercise seem to be key mechanisms through which retirement affects health.
