Financial literacy and the design of retirement plans |
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Authors: | Tomas Dvorak Henry Hanley |
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Affiliation: | a Union College, Economics, 807 Union St, Schenectady, United States;b Greenwich Associates, 6 High Ridge Park, Stamford, United States |
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Abstract: | We design and administer a financial literacy test tailored to a specific defined contribution plan. We find that participants show fairly good knowledge of the basic mechanics of the plan, but are unable to differentiate among various investment options. Knowledge is particularly low among women, low income and low education employees. We also find some evidence that personal contributions lead to more knowledge. These results support plan designs that have few investment options and encourage personal contributions. |
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Keywords: | Financial literacy Retirement plan design Defined contribution plans |
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