Tax-Sheltered Retirement Accounts: Can Financial Education Improve Decisions?
77 Pages Posted: 7 Aug 2019 Last revised: 24 May 2023
Date Written: July 2019
We conduct a stated-choice experiment to analyze the decision to contribute to front- or back-loaded tax-sheltered savings accounts. Our experimental design includes a randomized financial education treatment that provides information on these accounts. We assess whether respondents learn about the tax implications of these accounts and make contribution choices that increase after-tax income when exposed to the intervention. We find that our intervention improves both the understanding of the tax implications of the savings accounts (an increase of 6 to 15 percent) and contribution decisions. We find effects on after-tax lifetime-income for respondents by up to $1,900 per scenario presented.
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