Are Retirement Planning Tools Substitutes or Complements to Financial Capability?

58 Pages Posted: 6 Sep 2022

See all articles by Gopi Shah Goda

Gopi Shah Goda

Stanford University

Matthew Levy

London School of Economics & Political Science (LSE) - Department of Economics

Colleen Flaherty Manchester

University of Minnesota - Twin Cities - Center for Entrepreneurial Studies

Aaron Sojourner

W.E. Upjohn Institute for Employment Research; University of Minnesota; IZA Institute of Labor Economics

Joshua Tasoff

Claremont Colleges - Claremont Graduate University

Jiusi Xiao

Claremont Colleges - Claremont Graduate University

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Abstract

We conducted a randomized controlled trial to understand how a web-based retirement saving calculator affects workers’ retirement-savings decisions. In both conditions, the calculator projected workers’ retirement income goal. In the treatment condition, it additionally projected retirement income based on defined-contribution savings, prominently displayed the gap between projected goal and actual retirement income, and allowed users to interactively explore how alternative, future contribution choices would affect the gap. The treatment increased average annual retirement contributions by $174 (2.3%). However, effects were larger for those with greater financial knowledge, suggesting this type of tool complements, rather than substitutes for, underlying financial capability.

Keywords: retirement planning, retirement saving, exponential-growth bias, present bias, financial literacy, financial capability

Suggested Citation

Goda, Gopi Shah and Levy, Matthew and Flaherty Manchester, Colleen and Sojourner, Aaron J. and Tasoff, Joshua and Xiao, Jiusi, Are Retirement Planning Tools Substitutes or Complements to Financial Capability?. Available at SSRN: https://ssrn.com/abstract=4211243 or http://dx.doi.org/10.2139/ssrn.4211243

Gopi Shah Goda

Stanford University ( email )

SIEPR
366 Galvez St.
Stanford, CA 94305
United States
6507360480 (Phone)

Matthew Levy

London School of Economics & Political Science (LSE) - Department of Economics ( email )

Houghton Street
London WC2A 2AE
United Kingdom

Colleen Flaherty Manchester

University of Minnesota - Twin Cities - Center for Entrepreneurial Studies ( email )

United States

Aaron J. Sojourner

W.E. Upjohn Institute for Employment Research ( email )

300 South Westnedge Avenue
Kalamazoo, MI 49007-4686
United States

University of Minnesota

Carlson School of Management
MN
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Joshua Tasoff (Contact Author)

Claremont Colleges - Claremont Graduate University ( email )

150 E. Tenth Street
Claremont, CA 91711
United States

HOME PAGE: http://https://scholar.cgu.edu/joshua-tasoff/

Jiusi Xiao

Claremont Colleges - Claremont Graduate University ( email )

150 E. Tenth Street
Claremont, CA 91711
United States

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