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Financial Literacy, Retirement Preparation and Pension Expectations in the Netherlands

Rob Alessie (), Maarten van Rooij () and Annamaria Lusardi ()

No 110, CeRP Working Papers from Center for Research on Pensions and Welfare Policies, Turin (Italy)

Abstract: We present new evidence on financial literacy and retirement preparation in the Netherlands based on two surveys conducted before and after the onset of the financial crisis. We document that while financial knowledge did not increase from 2005 to 2010, significantly more individuals planned for their retirement in 2010. At the same time, employees’ expectations about the level of their pension income are high compared to what retirement plans may realistically provide. However, financially knowledgeable employees report lower expected replacement rates and acknowledge higher levels of uncertainty. Moreover using instrumental variation for financial conditions and financial knowledge of relatives, we find a positive effect of financial literacy on retirement preparation. Employing the panel feature of our dataset, we show that financial knowledge has a causal impact on retirement planning. Our findings suggest that the formation of pension expectations might be an important mechanism contributing to the impact of financial literacy on planning.

Keywords: Financial Sophistication; Retirement Planning; Retirement Expectations (search for similar items in EconPapers)
JEL-codes: D91 G11 D80 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-age, nep-eur and nep-lab
Date: 2011-03
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Working Paper: Financial Literacy, Retirement Preparation and Pension Expectations in the Netherlands (2011) Downloads
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