Social Security Literacy and Retirement Well-Being

35 Pages Posted: 21 Nov 2009

See all articles by Hugo Benitez-Silva

Hugo Benitez-Silva

SUNY at Stony Brook University - College of Arts and Science - Department of Economics

Berna Demiralp

Old Dominion University - Economics

Zhen Liu

Independent

Date Written: September 1, 2009

Abstract

We build upon the growing literature on financial literacy, which studies the prevalence of lack of knowledge about various financial issues, and analyze how much people know about the Social Security rules using a small pilot survey conducted in 2007, and a follow-up and extended survey funded by MRRC conducted in December of 2008. We then assess the consequences of the apparent prevalence of lack of information by individuals about the rules governing the Social Security system using a realistic and empirically-based life-cycle model of retirement behavior under uncertainty. We investigate the individual’s retirement and savings decisions under incomplete information and unawareness, in which a portion of the population does not know some or all of the rules of the system. We compare the outcomes in these cases to the outcome under full information, computing the welfare gain resulting from the acquisition of information regarding the Social Security system. Our analysis can illuminate the need for policies that foster knowledge of the system, which can improve welfare, and can result in better policy outcomes.

Suggested Citation

Benitez-Silva, Hugo and Demiralp, Berna and Liu, Zhen, Social Security Literacy and Retirement Well-Being (September 1, 2009). Michigan Retirement Research Center Research Paper No. WP 2009-210, Available at SSRN: https://ssrn.com/abstract=1510309 or http://dx.doi.org/10.2139/ssrn.1510309

Hugo Benitez-Silva (Contact Author)

SUNY at Stony Brook University - College of Arts and Science - Department of Economics ( email )

Stony Brook, NY 11794
United States

Berna Demiralp

Old Dominion University - Economics ( email )

Norfolk, VA 23529
United States

Zhen Liu

Independent ( email )

Amherst, NY

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