Literacy, trust and 401(k) savings behavior

Agnew

Julie R.

Agnew, Julie R.

Author

Szykman

Lisa

Szykman, Lisa

Author

Utkus

Stephen P.

Utkus, Stephen P.

Author

Young

Jean A.

Young, Jean A.

Author

text

working paper

Chestnut Hill, Mass. Center for Retirement Research at Boston College20082008monographic

Chestnut Hill, Mass.

Center for Retirement Research at Boston College

2008

monographic

Englisheng

English

eng

electronicapplication/pdfborn digital

electronic

application/pdf

born digital

At three large firms offering 401(k) plans, we assess the impact of financial literacy and trust on 401(k) savings behavior in voluntary and automatic enrollment 401(k) plans. Financial literacy plays a critical role in improving 401(k) savings behavior it reduces both the proportion of non-joiners in voluntary 401(k) plans and the proportion of quitters in automatic enrollment plans. Trust is critical as well in improving quit rates in automatic enrollment plans. Both financial literacy and trust appear to have more sizeable marginal effects than do those from income. We also find no initial evidence that non-participants are low-income rational agents who fail to participate in a 401(k) plan due to anticipated income support from Social Security. Our findings underscore the importance of ongoing workplace education for both voluntary and automatic enrollment plans and highlight the unique issue of trust in automatic enrollment plans.

Julie R. Agnew, Lisa Szykman, Stephen P. Utkus, and Jean A. Young.

CRR WP2007-10

CRR WP

2007-10

http://crr.bc.edu/images/stories/Working_Papers/wp_2007-10new.pdf

MChBEnglisheng

MChB

Englisheng

English

eng