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Imperfect Knowledge, Retirement and Saving

Author

Listed:
  • Alan L. Gustman

    (Dartmouth College and NBER)

  • Thomas L. Steinmeier

    (Texas Tech University)

Abstract

Using data from the Health and Retirement Study, this paper measures knowledge about future social security and pension benefits by comparing respondent reports of their expected benefits with benefits calculated from social security earnings records and employer provided descriptions of pension plans. The knowledge measures suggest that misinformation or lack of information about retirement benefits is the norm. Those who are most dependent on social security are the least well informed, while the opposite is true for pensions. Women and minorities are also less well informed about their retirement benefits. Those who engage in planning activities are somewhat better informed than those who do not, but with the exception of having requested a social security earnings record, the effects of planning activities on knowledge are modest. In descriptive and reduced form equations for planned and actual retirement saving, there is at best a modest relation of knowledge measures to planned and actual retirement and to nonpension, nonsocial security wealth as a share of lifetime earnings. Individuals who over estimate their benefits are likely to retire sooner than they planned, but the measured effects are again relatively modest.

Suggested Citation

  • Alan L. Gustman & Thomas L. Steinmeier, 2001. "Imperfect Knowledge, Retirement and Saving," Working Papers wp012, University of Michigan, Michigan Retirement Research Center.
    • Handle: RePEc:mrr:papers:wp012
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions

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