Are retirement planning tools substitutes or complements to financial capability?

Goda, Gopi Shah, Levy, Matthew R. ORCID: 0000-0002-2508-826X, Flaherty Manchester, Colleen, Sojourner, Aaron, Tasoff, Joshua and Xiao, Jiusi (2023) Are retirement planning tools substitutes or complements to financial capability? Journal of Economic Behavior and Organization, 214. pp. 561-573. ISSN 0167-2681

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Abstract

We conduct a randomized controlled trial to understand how a web-based retirement saving calculator affects workers' retirement-savings decisions. In both the treatment and active control conditions, the calculator projects workers' retirement income goal. In the treatment condition only, it also projects retirement income based on defined-contribution savings, prominently displays the gap between projected goal and actual retirement income, and allows users to interactively explore how alternative, future contribution choices would affect the gap. The treatment increased average annual retirement contributions by $174 (2.3 percent). However, effects were larger for those with higher measures of financial knowledge, suggesting this type of tool complements, rather than substitutes for, underlying financial capability.

Item Type:	Article
Additional Information:	© 2023 Elsevier B.V.
Divisions:	Economics
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HG Finance
JEL classification:	D - Microeconomics > D1 - Household Behavior and Family Economics > D14 - Personal Finance G - Financial Economics > G2 - Financial Institutions and Services > G23 - Pension Funds; Other Private Financial Institutions
Date Deposited:	25 Sep 2023 14:18
Last Modified:	25 Apr 2024 17:30
URI:	http://eprints.lse.ac.uk/id/eprint/120272

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