Who Feels the Nudge? Knowledge, Self-Awareness and Retirement Savings Decisions

50 Pages Posted: 23 Aug 2017 Last revised: 20 Mar 2018

Anders Anderson

Swedish House of Finance

David T. Robinson

Fuqua School of Business, Duke University; National Bureau of Economic Research (NBER); Duke Innovation & Entrepreneurship Initiative

Date Written: March 16, 2018

Abstract

Using a financial literacy survey of Swedish pension investors matched to actual retirement savings decisions, we argue that respondents can be broken into three groups: those who are financially literate, those who mistakenly believe they are financially literate, and those who know that they are not. We examine how these groups respond differently to informational nudges encouraging them to take charge of their own investments. Investors with mistaken beliefs responded to the nudge, and were more likely to work with mass-market advisors who steer them into high-fee funds. They underperform as a result. By comparison, those who either possess financial literacy or else understand that they do not possess financial literacy were less likely to respond to the nudge. They avoided advisors, stayed with the low-cost default fund, and therefore accumulated retirement savings more quickly.

Keywords: Pensions, financial advisors, financial literacy, overconfidence

JEL Classification: G18, D18

Suggested Citation

Anderson, Anders and Robinson, David T., Who Feels the Nudge? Knowledge, Self-Awareness and Retirement Savings Decisions (March 16, 2018). Swedish House of Finance Research Paper No. 17-15; 30th Australasian Finance and Banking Conference 2017. Available at SSRN: https://ssrn.com/abstract=3021962 or http://dx.doi.org/10.2139/ssrn.3021962

Anders Anderson (Contact Author)

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

David T. Robinson

Fuqua School of Business, Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0120
United States
919-660-8023 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Duke Innovation & Entrepreneurship Initiative ( email )

215 Morris St., Suite 300
Durham, NC 27701
United States

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