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Are Retirement Planning Tools Substitutes or Complements to Financial Capability?

Author

Listed:
  • Gopi Shah Goda
  • Matthew R. Levy
  • Colleen Flaherty Manchester
  • Aaron Sojourner
  • Joshua Tasoff
  • Jiusi Xiao

Abstract

We conduct a randomized controlled trial to understand how a web-based retirement saving calculator affects workers' retirement-savings decisions. In both conditions, the calculator projects workers' retirement income goal. In the treatment condition, it also projects retirement income based on defined-contribution savings, prominently displays the gap between projected goal and actual retirement income, and allows users to interactively explore how alternative, future contribution choices would affect the gap. The treatment increased average annual retirement contributions by $174 (2.3 percent). However, effects were larger for those with greater financial knowledge, suggesting this type of tool complements, rather than substitutes for, underlying financial capability.

Suggested Citation

  • Gopi Shah Goda & Matthew R. Levy & Colleen Flaherty Manchester & Aaron Sojourner & Joshua Tasoff & Jiusi Xiao, 2022. "Are Retirement Planning Tools Substitutes or Complements to Financial Capability?," NBER Working Papers 30723, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30723
    Note: AG PE
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    Cited by:

    1. Johannes Hagen & Amedeus Malisa & Andrea Schneider & Jana Schuetz, 2025. "A Reminder That Never Gets Old: Behavioral Effects of an Annual Pension Statement," CESifo Working Paper Series 12287, CESifo.
    2. Teresa Ghilarducci & Karthik Manickam, 2023. "A Critical Survey of Pension Provision And Pension Reform," SCEPA working paper series. 2023-04, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.

    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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