Discounting, Cognition, and Financial Awareness: New Evidence from a Change in the Military Retirement System

17 Pages Posted: 21 Nov 2014

See all articles by Curtis J. Simon

Curtis J. Simon

Clemson University

John T. Warner

Clemson University - John E. Walker Department of Economics

Saul Pleeter

American University

Date Written: January 2015

Abstract

The choice given military personnel between an immediate cash payment of $30,000 or a more generous retirement pension permits us to estimate individuals’ personal discount rates (PDRs). The resulting PDRs, about 7% for enlisted personnel and 2%–4.3% for officers, are precise and are correlated with a variety of other financial behaviors. The PDR is negatively related to educational attainment and the Armed Forces Qualification Test, but cognition seems to operate through channels other than being better informed; better-informed individuals were not always measured to be more patient.

JEL Classification: D91, D14

Suggested Citation

Simon, Curtis J. and Warner, John T. and Pleeter, Saul, Discounting, Cognition, and Financial Awareness: New Evidence from a Change in the Military Retirement System (January 2015). Economic Inquiry, Vol. 53, Issue 1, pp. 318-334, 2015, Available at SSRN: https://ssrn.com/abstract=2528856 or http://dx.doi.org/10.1111/ecin.12146

Curtis J. Simon (Contact Author)

Clemson University ( email )

Clemson, SC 29634
United States
8646563966 (Phone)
8646564192 (Fax)

HOME PAGE: http://people.clemson.edu/~cjsmn/

John T. Warner

Clemson University - John E. Walker Department of Economics ( email )

Clemson, SC 29634
United States

Saul Pleeter

American University ( email )

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1
Abstract Views
336
PlumX Metrics