Are retirement planning tools substitutes or complements to financial capability?

Gopi Shah Goda, Matthew R. Levy, Colleen Flaherty Manchester, Aaron Sojourner, Joshua Tasoff and Jiusi Xiao

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

Keywords: exponential-growth bias; financial capability; financial literacy; present bias; retirement planning; retirement saving (search for similar items in EconPapers)
JEL-codes: D14 G23 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2023-10-01
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Published in Journal of Economic Behavior and Organization, 1, October, 2023, 214, pp. 561-573. ISSN: 0167-2681

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