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Literacy, Trust and 401(k) Savings Behavior


  • Julie Agnew
  • Lisa R. Szykman
  • Stephen P. Utkus
  • Jean A. Young


At three large firms offering 401(k) plans, we assess the impact of financial literacy and trust on 401(k) savings behavior in voluntary and automatic enrollment 401(k) plans. Financial literacy plays a critical role in improving 401(k) savings behavior — it reduces both the proportion of non-joiners in voluntary 401(k) plans and the proportion of quitters in automatic enrollment plans. Trust is critical as well in improving quit rates in automatic enrollment plans. Both financial literacy and trust appear to have more sizeable marginal effects than do those from income. We also find no initial evidence that non-participants are low-income rational agents who fail to participate in a 401(k) plan due to anticipated income support from Social Security. Our findings underscore the importance of ongoing workplace education for both voluntary and automatic enrollment plans and highlight the unique issue of trust in automatic enrollment plans.

Suggested Citation

  • Julie Agnew & Lisa R. Szykman & Stephen P. Utkus & Jean A. Young, 2007. "Literacy, Trust and 401(k) Savings Behavior," Working Papers, Center for Retirement Research at Boston College wp2007-10, Center for Retirement Research, revised May 2007.
  • Handle: RePEc:crr:crrwps:wp2007-10

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    Cited by:

    1. Annamaria Lusardi & Olivia S. Mitchell, 2014. "The Economic Importance of Financial Literacy: Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 52(1), pages 5-44, March.
    2. Habila, Murna, 2015. "Influence of Financial Education on Retirement Security: Evidence from the state of Illinois," MPRA Paper 73988, University Library of Munich, Germany, revised 05 Jun 2016.

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