Institutional Affiliation: College of William and Mary
|How Much to Save? Decision Costs and Retirement Plan Participation|
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Deciding how much to save for retirement can be complicated. Drawing on a field experiment conducted with the Department of Defense, we study whether such complexity depresses participation in an employer-sponsored retirement saving plan. We find that simplifying one dimension of the enrollment decision, by highlighting a potential rate at which non-participants might contribute, increases participation in the plan. Similar communications that did not include a highlighted rate yield smaller effects. The results highlight how reducing complexity on the intensive margin of a decision (how much to contribute) can affect extensive margin behavior (whether to contribute at all) in a setting of policy interest.
|Borrowing to Save? The Impact of Automatic Enrollment on Debt|
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Does automatic enrollment into a retirement plan increase borrowing outside the plan? We study a natural experiment created when the U.S. Army began automatically enrolling newly hired civilian employees into the Thrift Savings Plan. Four years after hire, automatic enrollment causes no significant change in credit scores (point estimate 0.001 standard deviations) or debt balances excluding auto loans and first mortgages (point estimate -0.6% of annual salary). We also find no significant increase in auto loan and first mortgage balances in our main regression specification, although the estimated increases in these categories are economically and statistically significant in alternative specifications.
|Financial Literacy, Financial Education and Economic Outcomes|
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In this article we review the literature on financial literacy, financial education, and consumer financial outcomes. We consider how financial literacy is measured in the current literature, and examine how well the existing literature addresses whether financial education improves financial literacy or personal financial outcomes. We discuss the extent to which a competitive market provides incentives for firms to educate consumers or offer products that facilitate informed choice. We review the literature on alternative policies to improve financial outcomes, and compare the evidence to evidence on the efficacy and cost of financial education. Finally, we discuss directions for future research.
Published: Justine S. Hastings & Brigitte C. Madrian & William L. Skimmyhorn, 2013. "Financial Literacy, Financial Education, and Economic Outcomes," Annual Review of Economics, Annual Reviews, vol. 5(1), pages 347-373, 05. citation courtesy of