What You Don?t Know Can?t Help You: Pension Knowledge and Retirement Decision Making

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  • 1 January 2005
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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. While virtually all recent empirical work has relied on administrative- or employer-reported data, we document an important role for self-reported pension data in determining retirement behavior. Well-informed individuals are five times more responsive to pension incentives than the average. In contrast, ill-informed individuals respond to their own misperceptions of the incentives rather than being unresponsive to any measured incentives.

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