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Are financial retirement incentives more effective if pension knowledge is high?



We study the combined effects of financial incentives and information provision on retirement behavior. To elicit preferences for retirement timing in the laboratory, we ask subjects to make retirement choices under different payoff schemes that introduce variation in financial incentives. Testing ceteris paribus conditions of the financial incentive alone shows a considerable delay of retirement once early retirement becomes financially less attractive. However, varying available information as another treatment parameter reveals considerable heterogeneity in the functioning of these incentives. Subjects who are explicitly informed about the expected pension wealth respond more strongly to financial incentives compared with those who only know their pension annuity. Being informed about a forward-looking measure of pension benefits makes the financial consequences of retirement choices more salient to the decision maker.



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We are grateful to Jeannette Brosig-Koch, Colin Green, Timo Heinrich, Christoph Helbach, Reinhold Schnabel, and numerous seminar participants for helpful discussions and suggestions. The editor Michael Haliassos and the referees provided valuable comments that helped to improve the paper. Special thanks to Thomas Bauer and Wim Kösters for supporting the recruitment of older workers. Fernanda Martinez Flores and Anja Rösner provided excellent research assistance. Financial support from the German Research Foundation (DFG) is gratefully acknowledged (SCHN553/1-1).



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Are financial retirement incentives more effective if pension knowledge is high?



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