What You Don?t Know Can?t Help You: Pension Knowledge and Retirement Decision Making

  • 1 January 2005
    • preprint
    • Published in RePEc
Abstract
This paper provides an answer to an important empirical puzzle in the retirementliterature: while most people know little about their own pension plans, retirement behavior isstrongly affected by pension incentives. We combine administrative and self-reported pensiondata to measure the retirement response to actual and perceived financial incentives. Whilevirtually all recent empirical work has relied on administrative- or employer-reported data, wedocument an important role for self-reported pension data in determining retirement behavior.Well-informed individuals are five times more responsive to pension incentives than the average.In contrast, ill-informed individuals respond to their own misperceptions of the incentives ratherthan being unresponsive to any measured incentives.
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