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Social Security Literacy and Retirement Well-Being

Author

Listed:
  • Hugo Benítez-Silva

    (SUNY-Stony Brook)

  • Berna Demiralp

    (Old Dominion University)

  • Zhen Liu

    (University at Buffalo)

Abstract

We build upon the growing literature on financial literacy, which studies the prevalence of lack of knowledge about various financial issues, and analyze how much people know about the Social Security rules using a small pilot survey conducted in 2007, and a follow-up and extended survey funded by MRRC conducted in December of 2008. We then assess the consequences of the apparent prevalence of lack of information by individuals about the rules governing the Social Security system using a realistic and empirically-based life-cycle model of retirement behavior under uncertainty. We investigate the individual’s retirement and savings decisions under incomplete information and unawareness, in which a portion of the population does not know some or all of the rules of the system. We compare the outcomes in these cases to the outcome under full information, computing the welfare gain resulting from the acquisition of information regarding the Social Security system. Our analysis can illuminate the need for policies that foster knowledge of the system, which can improve welfare, and can result in better policy outcomes.

Suggested Citation

  • Hugo Benítez-Silva & Berna Demiralp & Zhen Liu, 2009. "Social Security Literacy and Retirement Well-Being," Working Papers wp210, University of Michigan, Michigan Retirement Research Center.
  • Handle: RePEc:mrr:papers:wp210
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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. Simonovits, András, 2015. "Hogyan hat a nyugdíjszabályok hiányos ismerete a dolgozók döntéseire?
      [How does imperfect knowledge of pension rules affect workers decisions?]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 263-283.
    3. Hugo Benitez-Silva & Na Yin, 2007. "An Empirical Study of the Effects of Social Security Reforms on Claming Behavior and Benefits Receipt Using Aggregate and Public-Use Administrative Micro Data," Department of Economics Working Papers 07-05, Stony Brook University, Department of Economics.
    4. Jeffrey B. Liebman & Erzo F. P. Luttmer, 2012. "The Perception of Social Security Incentives for Labor Supply and Retirement: The Median Voter Knows More Than You'd Think," Tax Policy and the Economy, University of Chicago Press, vol. 26(1), pages 1-42.
    5. Jeffrey B. Liebman & Erzo F. P. Luttmer, 2015. "Would People Behave Differently If They Better Understood Social Security? Evidence from a Field Experiment," American Economic Journal: Economic Policy, American Economic Association, vol. 7(1), pages 275-299, February.

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