This project produced two papers:
Planning and the Effectiveness of Retirement Seminars
In this paper, Professor Lusardi examines workers" planning activity toward retirement. Using data from the Health and Retirement Study (HRS), she examines the determinants of planning. She also devotes attention to gender differences in planning to try to explain why so many women do not plan for retirement. In addition, Professor Lusardi examines whether employers" initiatives to reduce planning costs via, for example, retirement seminars, have an effect on how workers save.
Using econometric techniques that account for the fact that attending retirement seminars is a choice variable and that seminars are likely to be offered to the workers who most need them, the author shows that seminars are an effective way to foster savings. This is particularly the case for those with low education and those who save little. Her estimates suggest that, by offering financial education, the ratio of non-pension wealth to permanent income can be increased by as much as 50% for the families at the bottom of the distribution and for those with low education. Retirement seminars increase the ratio of total wealth (comprehensive of pension and Social Security) over permanent income by 15-20% for both high and low education families. Taken together, this evidence suggests that retirement seminars are an effective way to foster wealth accumulation and bolster financial security.
Preparing for Retirement
The importance of planning costs (presented to the National Tax Association) The responsibility to save and contribute to a pension is increasingly left to the individual worker. For example, many firms have shifted from defined benefit to defined contribution pensions, where workers have to choose not only the amount of contributions, but also how to allocate their pension wealth. The current debate on the privatization of Social Security considers putting individuals in charge of allocating their Social Security wealth. There is little research, however, on the difficulties that people face in making decisions about pensions and savings and how they overcome the complexities of devising saving plans. Many employers, in particular large ones, have started offering financial education to workers. However, there is mixed evidence on the effectiveness of financial education in the workplace.
In this paper, data from the Health and Retirement Study (HRS) is used to examine workers" planning activity toward retirement. Professor Lusardi first studies the determinants of planning and then examines whether employers" initiatives to reduce planning costs via retirement seminars have an effect on workers" savings. She finds that retirement seminars stimulate savings, particularly for those at the bottom of the wealth distribution and those with low education.
