Imperfect Knowledge, Retirement and Saving

Posted: 17 Jan 2008

See all articles by Alan L. Gustman

Alan L. Gustman

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Thomas L. Steinmeier

Texas Tech University - Department of Economics and Geography

Multiple version iconThere are 2 versions of this paper

Date Written: June 1, 2001

Abstract

Using data from the Health and Retirement Study, this paper measures knowledge about future social security and pension benefits by comparing respondent reports of their expected benefits with benefits calculated from social security earnings records and employer provided descriptions of pension plans. The knowledge measures suggest that misinformation or lack of information about retirement benefits is the norm. Those who are most dependent on social security are the least well informed, while the opposite is true for pensions. Women and minorities are also less well informed about their retirement benefits. Those who engage in planning activities are somewhat better informed than those who do not, but with the exception of having requested a social security earnings record, the effects of planning activities on knowledge are modest. In descriptive and reduced form equations for planned and actual retirement saving, there is at best a modest relation of knowledge measures to planned and actual retirement and to nonpension, nonsocial security wealth as a share of lifetime earnings. Individuals who over estimate their benefits are likely to retire sooner than they planned, but the measured effects are again relatively modest.

Note: The NBER version of this paper can be downloaded with charge from: http://ssrn.com/abstract=278757.

Suggested Citation

Gustman, Alan L. and Steinmeier, Thomas L., Imperfect Knowledge, Retirement and Saving (June 1, 2001). Michigan Retirement Research Center Research Paper No. WP 2001-012, Available at SSRN: https://ssrn.com/abstract=1084654 or http://dx.doi.org/10.2139/ssrn.1084654

Alan L. Gustman (Contact Author)

Dartmouth College - Department of Economics ( email )

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Thomas L. Steinmeier

Texas Tech University - Department of Economics and Geography ( email )

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United States
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