"What You Don't Know Can't Help You: Worker Knowledge and Retirement Decision-Making"
Review of Economics and Statistics, volume 90(2), May 2008
Chan, S. & Stevens, A.H.
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 and document an important role for self-reported pension data in determining retirement behavior. Well-informed individuals are far more responsive to pension incentives than the average individual. Ill-informed individuals seem to respond systematically to their own misperceptions of pension incentives.