Orientierungsprozesse im Vertrauensdilemma. Beziehungskonstruktionen in Beratungen zur privaten Altersvorsorge

Financial advice given by consultants is crucial for retirement saving decisions. We argue that those willing to save are facing a dilemma since there is a widespread mistrust towards the financial industry while financial advice is indispensable for coping with complexity in the decision process. Exploring the case of the state-subsidized Riester-pension in Germany, we show that savers construct personal relationships with the advisor to deal with this complex dilemma in terms of theories on trust. Using a mixed-method design embracing both quantitative techniques—cross-sectional as well as longitudinal (fixed-effects) approaches—and qualitative evidence, we shed new light on old age saving decisions. In detail, the exploitation of longitudinal surveys (of GSOEP and the German SAVE Panel 2004–2010) and of 18 problem-centred interviews provides the following findings: (1) Retirement saving decisions often rely on pre-existing relationships to financial advisors. (2) The less alternative resources available, the more savers rely on these relationships. (3) Financial advisors use their existing relationships to sell pensions. (4) The qualitative material unveils different patterns concerning the decision-making process which are trusteeship, strategic alliance, and acceptable ad-hoc collaboration. Altogether, the widespread idea of private retirement saving resulting from an atomistic and rational planning of the future is an illusion.     

Information Search for Retirement Plans Among Financially Distressed Consumers

Using data from the Mature Market Survey (MMS) sponsored by the InCharge Education Foundation, this study examined financially distressed consumers’ information search behaviors for retirement plans. Findings showed that financially distressed consumers seek financial information from media and professional services when making a retirement plan. Age was negatively related to the extent of the information search. Income and gender were positively related to the extent of the information search for retirement planning while financial attitude and retirement income sources were not significantly associated with the information search. Results suggest that there is a great need of financial education programs and efficient financial information delivery for older financially stressed consumers.     

Financial literacy and retirement planning in the Netherlands

The complexity of financial decisions that households now face has increased to unprecedented levels. At the same time, households seem to lack the financial knowledge to cope with these decisions, including how to save and invest adequately for retirement. In this paper, we examine the relationship between financial knowledge and retirement planning in the Netherlands. For this purpose, we have designed a module on financial literacy and planning for the De Nederlandsche Bank (DNB) Household Survey. We find a strong and positive relationship between financial knowledge and retirement planning; those who are more financially knowledgeable are more likely to plan for retirement. Using information on economics education acquired in school, we show that the nexus of causality goes from financial literacy to planning rather than the other way around.     

The role and relevance of domain knowledge, perceptions of planning importance, and risk tolerance in predicting savings intentions

The need for individuals to increase retirement savings has been widely promoted, yet our understanding of the motivations of individuals to save at a higher rate remains sparse. This paper reports the findings of a survey of 2300 retirement savings fund members and their motivations to contribute more to savings and to actively manage their investment strategy. Utilising the theory of planned behavior, the study reveals respondent’s self-reported attitudes, subjective norms and perceptions of behavioral control account for a high proportion of the variance in behavioral intention. Contrary to expectations, the study finds that respondent’s risk tolerance adds little to the prediction of behavioral intention. By contrast, perceptions of planning importance and self-assessed planning preparedness (domain knowledge) are found to exert powerful indirect influences on behavioral intentions via the perceived behavioral control construct. This novel finding confirms the relevance of planning constructs and financial literacy to an understanding of retirement savings behavior, and establishes a need to improve levels of financial literacy in society.     

THE ROLE OF FINANCIAL LITERACY IN DETERMINING RETIREMENT PLANS

Workers nearing retirement face many important, and often irreversible, choices. We collected detailed demographic and financial literacy data on over 1,500 workers nearing retirement at three large companies to assess how individuals are planning for retirement. Many respondents display limited knowledge and understanding of public and company‐provided retirement benefits. Controlling for basic demographics and wealth, we find that misconceptions about eligibility ages and plan generosity influence workers' expected age of retirement. Although retirement‐related decisions will affect workers' well‐being for the remainder of their lifetimes, many do not possess enough basic financial knowledge to confidently make optimal choices. (JEL J26, J320, J240)     

Encouraging workers to save: the 2005 Retirement Confidence Survey

This Issue Brief reports findings of the 15th annual Retirement Confidence Survey (RCS), which points to potential solutions to the American retirement savings problem, specifically ways that could help workers save more through their employment-based retirement plans. IMPORTANCE OF EMPLOYER MATCH: More than 7 in 10 workers not currently contributing to their employer-sponsored retirement plan say an employer contribution of up to 5 percent of their salary would make them much more or somewhat more likely to participate (72 percent). SIMPLIFIED OPTIONS: Other retirement plan options that nonparticipants say would make them more likely to contribute are an investment option that automatically becomes more conservative as their retirement date approaches (66 percent) and a feature that automatically raises workers' contributions by a fixed amount or percentage when they receive a pay raise (55 percent). Two-thirds of nonparticipants indicate they would be very or somewhat likely to remain in their employer's plan if they were automatically enrolled (66 percent). SOCIAL SECURITY: Nearly 7 in 10 of today's workers are skeptical that Social Security will continue to provide benefits of at least equal value to those received by current retirees (68 percent). This proportion has remained relatively constant in recent years, but is below the 1995 level (79 percent). Workers continue to be unable to identify the age at which they will be eligible for full Social Security benefits. MOST BEHIND SCHEDULE IN SAVING: A majority of workers believe they are behind schedule when it comes to planning and saving for retirement (55 percent). Most of those behind schedule say that high expenses, particularly everyday expenses (49 percent), child-rearing expenses (39 percent), and medical costs (35 percent), are a major factor in keeping them from saving. LESS THAN HALF HAVE TRIED TO CALCULATE NEEDED SAVINGS: Approximately 4 in 10 workers say they have tried to calculate how much they need to accumulate for retirement. More than one-third of these workers say they asked a financial advisor to calculate this number or used their own estimates; 10 percent say they simply guessed how much they will need in retirement.     

Women’s Household Preparation for Retirement at Young and Mid-Adulthood: Differences by Children and Marital Status

There are increasing concerns about whether Americans are saving enough for retirement. Recent research has called for improved understanding of the relationship between family structure and economic preparation for retirement at earlier stages of the life course. Using multiple years of the Federal Reserve Board’s Survey of Consumer Finances, we examined how number of children and marital status were associated with women’s household retirement savings at young and mid-adulthood. Several household-level indicators of retirement preparation were considered: desire to save for retirement, retirement account ownership, eligibility to participate in a defined-contribution plan, participation in defined-contribution plans, and retirement account wealth. Results from regression analyses revealed variation in women’s household financial preparation for retirement at young and mid-adulthood by family context. Additional children were negatively associated with several measures of retirement preparation among single-female households but not for couple households. Overall, we found that low economic preparation for retirement is an additional economic disadvantage facing single mothers at young and mid-adulthood, with potentially long-term implications for their financial security. The results shed light on linkages between family structure and women’s economic status.     

Selling retirement in financial planning advertisements

The nature of, and course toward, retirement are perennial issues that the financial services industry bids to define. We used a sample of print advertisements for retirement financial planning from 1997 to 1998 to examine how advertisers create structures of meaning for retirement. The model customer was an individual, conscientious and self-reliant, typically male, and financially sophisticated. Worthy traits notwithstanding, ads suggested to readers that saving for retirement is a difficult and anxious task, the complexity of which the companies stood ready to manage. The savings goal — retirement itself — was depicted in only a minority of ads, underscoring its life-course givenness and desirability. Ads with an image of retirement showed an emancipatory life stage of active leisure underwritten by necessary financial security. The ultimate commodity for sale here was rationality of a remote and near kind — an eventual retirement that is controllable, and a financial path to that state that is routine and orderly.     

Retirement Intentions of Same-Sex Couples

Summary

Retirement intentions of same-sex and opposite-sex couples were investigated. Data were drawn from the Cornell Couples and Careers Study. The sample consists of 32 women in same-sex relationships, 7 men in same-sex relationships, 30 men and women in cohabiting relationships, and 30 married men and women. Participants' responses to such questions as age expected to retire, age they began retirement planning, degree of financial planning for retirement, degree of preparation for housing and healthcare, and plans for post-retirement work and volunteering were analyzed. Female same-sex couples self-rate on financial planning for retirement to a significantly lower degree than married couples. The implications for post-retirement well-being and the need for financial planning are discussed.     

Social and Psychological Barriers to Private Retirement Savings in Hong Kong

Using a phone survey conducted among Hong Kong workers, we examined the association of institutional, social, and psychological factors with engagement in both private retirement savings and the total amount of savings. Alarmingly, this study demonstrates that approximately 42% of Hong Kong workers do not save privately for their retirement. We found that age, education, number of children, support from spouse and friends, social regulation, perceived financial knowledge, and financial management capacity are associated with engagement in private retirement savings. Among those who saved, age, education, perceived financial knowledge, and financial management capacity are related to the amount of savings. Measures that could increase the social support for retirement savings as well as enhance their financial knowledge and management ability should be developed and implemented so that more workers engage in private retirement savings. A promising policy option for the Hong Kong government is to offer a tax incentive to promote additional savings for old-age income protection.     

The 2012 Retirement Confidence Survey: job insecurity, debt weigh on retirement confidence, savings

Americans' confidence in their ability to retire comfortably is stagnant at historically low levels. Just 14 percent are very confident they will have enough money to live comfortably in retirement (statistically equivalent to the low of 13 percent measured in 2011 and 2009). Employment insecurity looms large: Forty-two percent identify job uncertainty as the most pressing financial issue facing most Americans today. Worker confidence about having enough money to pay for medical expenses and long-term care expenses in retirement remains well below their confidence levels for paying basic expenses. Many workers report they have virtually no savings and investments. In total, 60 percent of workers report that the total value of their household's savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000. Twenty-five percent of workers in the 2012 Retirement Confidence Survey say the age at which they expect to retire has changed in the past year. In 1991, 11 percent of workers said they expected to retire after age 65, and by 2012 that has grown to 37 percent. Regardless of those retirement age expectations, and consistent with prior RCS findings, half of current retirees surveyed say they left the work force unexpectedly due to health problems, disability, or changes at their employer, such as downsizing or closure. Those already in retirement tend to express higher levels of confidence than current workers about several key financial aspects of retirement. Retirees report they are significantly more reliant on Social Security as a major source of their retirement income than current workers expect to be. Although 56 percent of workers expect to receive benefits from a defined benefit plan in retirement, only 33 percent report that they and/or their spouse currently have such a benefit with a current or previous employer. More than half of workers (56 percent) report they and/or their spouse have not tried to calculate how much money they will need to have saved by the time they retire so that they can live comfortably in retirement. Only a minority of workers and retirees feel very comfortable using online technologies to perform various tasks related to financial management. Relatively few use mobile devices such as a smart phone or tablet to manage their finances, and just 10 percent say they are comfortable obtaining advice from financial professionals online.     

Bridging the Gap: Anticipated Shortfalls in Future Retirement Income

Determining an appropriate and desirable income replacement rate is one of the keys to developing a successful personal financial plan for retirement. In the present investigation, we examined workers?? expectations of the pre-retirement income they believed would be necessary in order to have a ??good?? retirement relative to the income they anticipated they would receive. Analyses revealed an expected income shortfall, the magnitude of which was positively related to one??s income and age. Sex was also related to the magnitude of the expected shortfall, with women anticipating a larger financial discrepancy than men. Finally, a sex by marital status interaction emerged in which single women were found to have a larger shortfall than single men and married individuals of both sexes. Findings are discussed in terms of the importance of interventions aimed at educating workers to understand the value of selecting a reasonable retirement income replacement rate.     

Commitment among ethical investors: An experimental approach

Recent studies have highlighted two apparent `contradictions' in the behaviour of ethical investors: it is not unusual for people to waive the interest on their ethical investments but say they would invest more if the interest rate was raised and it is common for people to invest both in ethical and standard funds. Lewis and Mackenzie have proposed that these contradictions can be resolved using the ideas of framing and mental accounts. The current paper uses an experimental approach to explore these issues. Participants took part in a role-play of a consultation with a `virtual' financial advisor. This was setup on the World Wide Web. Participants used the Netscape browser to provide financial and other information to the financial advisor. They were then presented with a variety of investment choices. The study revealed that ethical investors were generally committed to ethical investment, and kept such investments even if they performed badly or were ethically ineffective.     

Looking Beyond Retirement: Patterns and Predictors of Formal End-of-Life Planning Among Retirement Age Individuals

This study uses the 2004 wave of the Wisconsin Longitudinal Study to examine the patterns and predictors of formal End-of-Life (EOL) planning strategies among retirement age individuals and whether EOL health and financial planning are highly correlated planning behaviors. Using logistic regressions and multinomial logistic regressions, findings show that EOL health plans appear to be done in combination with financial plans. Females, higher educated persons, and those with higher net worth are more likely to have integrated EOL plans containing both EOL health and EOL financial plans. It is suggested that policy makers, health and financial professionals, and educators concerned about the consequences of the absence of EOL health plans should facilitate the joint planning with finances, especially among those at higher risk of not having such plans (e.g., males, less educated persons, and those who have little net worth).

Interactions of Behavior and Environment as Contributing Factors in the Discharge of Residents with Dementia from Assisted Living Facilities

While retirement communities have existed for over fifty years, they have received relatively little analysis. A clear consensus on definition does not even exist. Based on a literature review, we offer a definition that includes several criteria related to the housing units, boundaries, services and/or leisure amenities, age restrictions, voluntary relocation, and shared space. We delineate the variety of types of retirement communities and address the current and future challenges facing retirement communities. Such a discussion is urgent, given the lack of current housing policy, when both the potential demand and pertinent financial challenges are greater than ever.     

A post-crisis assessment of retirement income adequacy for Baby Boomers and Gen Xers

DETERMINING THOSE "AT RISK" OF INSUFFICIENT RETIREMENT INCOME: The analysis in this paper was designed to answer two questions: 1) What percentage of U.S. households became "at risk" of insufficient retirement income as a result of the financial market and real estate crisis in 2008 and 2009? 2) Of those who are at risk, what additional savings do they need to make each year until retirement age to make up for their losses from the crisis? The results are from the 2010 EBRI Retirement Security Projection Model by the Employee Benefit Research Institute. KEY FINDINGS: Range at risk: The percentage of households that would not have been "at risk" without the 2008-2009 crisis but that ended up "at risk" varies from a low of 3.8 percent to a high of 14.3 percent. 50-50 chance of adequacy: Looking at all Early Boomer households that would need to save an additional amount (over and above the savings already factored into the baseline model), the median percentage of additional compensation for these households desiring a 50 percent probability of retirement income adequacy would be 3.0 percent of compensation each year until retirement age to account for the financial and housing market crisis in 2008 and 2009. 90 percent chance of adequacy: Looking at all Early Boomer households that would need to save an additional amount (over and above the savings already factored into the baseline model), the median percentage of additional compensation for these households desiring a 90 percent probability of retirement income adequacy would be 4.3 percent of compensation. Range of adequacy: Looking only at Early Boomer households that would need to save an additional amount (over and above the savings already factored into the baseline model), that had account balances in defined contribution plans and IRAs as well as exposure to the real estate crisis in 2008 and 2009 shows a median percentage for of 5.6 percent for a 50 percent probability and 6.7 percent for a 90 percent probability of retirement income adequacy.     

Lessons from the evolution of 401(k) retirement plans for increased consumerism in health care: an application of behavioral research

Employment-based health and retirement benefit programs have followed a similar path of evolution. The relative decision-making roles of the employer and the worker have shifted from the employer to the worker, and workers are more responsible than perhaps they ever have been for their well being--both in terms of their health in general and their financial security during retirement. This shift has been supported, in part, by legislation--namely ERISA, the HMO Act of 1973, the Revenue Act of 1978, and most recently, the Pension Protection Act. This Issue Brief does not pass judgment on this development or address who should bear the responsibilities of preparing workers for retirement or of rationing health care services. The current trend in health care design is toward increased "consumerism." Consumer-driven health is based on the assumption that the combination of greater cost sharing (by workers) and better information about the cost and quality of health care will engage workers to become better health care decision makers. It is hoped that workers will seek important, necessary, high-quality, cost-effective care and services, and become less likely to engage providers and services that are unnecessary and ineffective from either a quality or cost perspective. As employers look ahead toward continually improved plan design, there may be benefits in considering the lessons learned from studying worker behaviors. Specifically, there is evidence about the effects of choice, financial incentives, and information on worker decision making. As a result of research in this area, many retirement plan sponsors have moved toward plan designs and programs that recognize the benefits of well-designed defaults, simplified choices, required active decision making, framing, and commitment to future improvements. With respect to choice, it is now known that more is not always better and may even be worse in some cases. Just as fewer shoppers actually bought a jar of jelly when it was one of 24 as opposed to one of six, evidence has shown that people tend to be less likely to join a company-sponsored retirement plan when more investment options are offered. More choice can also lead to lower satisfaction. It is also known that workers may not be able to appropriately sort through many complex alternatives and that education is not always as effective as employers would hope. Decision complexity often forces people to find a way to simplify, and one of the easiest rules of thumb is to pick the option with the lowest short-term cost, even when that alternative is more costly in the longer run. It is also known that, for good or for bad, choices are constructed on the fly; preferences are dynamic, and logic does not always apply. Financial incentives are helpful in motivating behavior, but they do not affect everyone's decisions. Despite significant financial incentives to participate in 401(k) plans, many workers choose not to. Similarly, despite many of the financial incentives embedded in health care plan design, it can be expected that these incentives will not effectively motivate and engage all workers. One seemingly rational approach to improve workers' decision making is to provide education and guidance to help them sort through complex alternatives and to demonstrate the value of financial incentives. Certainly, providing education and guidance in the form of decision support tools may be an employer's responsibility. However, some studies have shown that, even when "educated" workers have the intent to make improved decisions, they often lack follow-through and fail to take action. In short, education and guidance may not be enough to foster improved health care consumerism. Some employers have begun to design benefit programs with a view toward overcoming behavioral tendencies that negatively affect workers' well-being. Newer retirement plan designs involve careful consideration of default choices. These defaults apply unless workers actively choose a different alternative. Typically, the default attempts to "nudge" workers toward optimal behavior. In the case of 401(k) retirement plan design, more employers are moving toward a default of automatic enrollment in the plan, with automatic investment in a diversified portfolio. Still, additional empirical research and experimentation may be needed to further understand the effects of new retirement plan design features. Future work may also precisely illuminate how the lessons discussed in this Issue Brief may apply to health care plan design that results in improved health-related behaviors. Given the impressive preliminary results in improving retirement planning behaviors, such research and experimentation are likely to be worthwhile.     

EMPLOYEE FINANCIAL LITERACY AND RETIREMENT PLAN BEHAVIOR: A CASE STUDY

This article uses administrative data on all active employees of the Federal Reserve (FR) System to examine participation in and contributions to the Thrift Saving Plan, the System's defined contribution (DC) plan. We link to administrative records a unique employee survey of economic/demographic factors including a set of financial literacy questions. Not surprisingly, FR employees are substantially more financially literate than the population at large. Most importantly, financially savvy employees are also most likely to participate in their DC plan. Sophisticated workers contribute three percentage points more of their earnings to the DC plan than do the less knowledgeable, and they hold more equity in their pension accounts. We examine changes in employee plan behavior 1 year after employees completed a Learning Module about retirement planning, and we compare it to baseline patterns. We find that those employees who completed the Learning Module were more likely to start contributing and less likely to have stopped contributing to the DC plan postsurvey. In sum, employer‐provided learning programs are shown to significantly impact employee retirement saving decisions and consistent with a lot of other research, higher levels of financial literacy are found to have a beneficial impact on retirement saving patterns. (JEL J3, H7)     

The 1999 Small Employer Retirement Survey: building a better mousetrap is not enough

As of 1995, there were 5.3 million small-employer firms (100 or fewer employees) in the United States. These small firms employed 38.0 million individuals, representing 38 percent of all employment. Therefore, low retirement plan coverage among small employers directly affects a sizeable fraction of the national work force. There are a number of reasons why more small employers do not offer retirement plans. Cost and administration-related issues do matter, but for many small employers these take a back seat to other issues. For some, the main driver is the financial reality of running a small business: Their revenue is too uncertain to commit to a plan. For others, the most important reasons for not sponsoring a plan are employee-related, e.g., the workers do not consider retirement savings to be a priority, or the employer's work force has such high turnover that it does not make sense to sponsor a plan. Many nonsponsors are unfamiliar with the different retirement plan types available to them as potential plan sponsors, especially the options created specifically for small employers. For example, most nonsponsors said they have never heard of (36 percent) or are not too familiar with (20 percent) SIMPLE plans for small businesses. Fifteen percent of small employers report that they are very likely to start a plan in the next two years, while 24 percent say this is somewhat likely. Nonsponsors report that the two items most likely to lead to serious consideration of sponsoring a plan are an increase in profits (69 percent) and business tax credits for starting a retirement plan (67 percent). Major drivers of low retirement plan sponsorship among small employers are who they employ and the uncertainty of revenue flows. While issues of administrative cost and burden matter, they are only part of the puzzle. Therefore, the solution is not simply "build it and they will come," by creating simpler and simpler retirement plans geared to small businesses. Rather, it is build it and they will come once the business reaches a certain level of profitability and stability, and once retirement planning and saving are more of a priority for the small employer's workers.     

THE ROLE OF INFORMATION ON RETIREMENT PLANNING: EVIDENCE FROM A FIELD STUDY

Many households neglect the pivotal task of planning for retirement. Proposals to stimulate employees to save for retirement in the workplace include tax subsidies, which are costly, and using automatic defaults, which may not complement the heterogeneous preferences of savers. This randomized field study shows that an information‐based intervention increases reported retirement plan participation, emergency savings, and using a budget. Employees offered access to education increased actual retirement deferrals by $26 per month. These results suggest that retirement education programs may be an effective strategy to increase retirement planning and saving behavior. (JEL J26, D14, D91)