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Retirement plans and saving decisions: the role of information and education

Published online by Cambridge University Press:  08 February 2006

ROBERT L. CLARK ,
MADELEINE B. d'AMBROSIO ,
ANN A. McDERMED  and
KSHAMA SAWANT
ROBERT L. CLARK
Affiliation:
North Carolina State University
MADELEINE B. d'AMBROSIO
Affiliation:
TIAA-CREF Institute
ANN A. McDERMED
Affiliation:
North Carolina State University
KSHAMA SAWANT
Affiliation:
Washington and Lee University
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Abstract

Increasingly, individuals are being required to take more responsibility for their own retirement saving. Lifecycle theories of resource allocation provide a framework to examine work, retirement, consumption, and saving decisions. However, optimal decision making requires adequate knowledge of financial mathematics, risk and return properties of investments, and expectations concerning wage growth and tax policy. This paper explores the response of individuals to financial education seminars. Using data from three surveys of participants in seminars offered by TIAA-CREF, we estimate changes in retirement goals and saving behavior after the respondents have attended a seminar which discusses keep components of saving for retirement. The results indicate that financial education can produce significant changes in how individuals think and plan for retirement. Throughout the analysis, women were found to be more responsive to the seminar and were more likely to raise their desired retirement age, increase their target income replacement goal, and alter their savings behavior.

Type
Research Article
Information
Journal of Pension Economics & Finance , Volume 5 , Issue 1 , March 2006 , pp. 45 - 67
Copyright
2006 Cambridge University Press

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Footnotes

We acknowledge the cooperation of numerous consultants in TIAA-CREF Client Services who administered the surveys in conjunction with seminars around the country. We would like to thank Pirie McIndoe, Al Gonzalez and Brian Usischon, TIAA-CREF Raleigh-Durham Office, for their assistance in pre-testing the survey and Robert Romano, TIAA-CREF Sales Support, for his efforts in coordinating the integration of the surveys with the financial education seminars. Paul Mulvey played a major role in the design of the survey. Juanita Kreps contributed to the development of the overall project. Research on this project by Clark and Sawant has been supported by a grant from the TIAA-CREF Institute.