What You Don't Know Can't Help You: Pension Knowledge and Retirement Decision Making

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  • 1 January 2003
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      • Published in RePEc
Abstract
This paper provides an answer to an important empirical puzzle in the retirement literature: while most people know little about their own pension plans, retirement behavior is strongly affected by pension incentives. We combine administrative and self-reported pension data to measure the retirement response to actual and perceived financial incentives. We find that well-informed individuals are five times more responsive to pension incentives than the average individual when knowledge is ignored. We further find that the ill-informed individuals do respond to their own misperception of the incentives, rather than being unresponsive to any incentives.
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