Ruhr Economic Papers

Ruhr Economic Papers #641

Are Financial Retirement Incentives More Effective if Pension Knowledge is High?

by Matthias Giesecke and Guanzhong Yang

UDE, RWI, 09/2016, 66 S./p., 8 Euro, ISBN 978-3-86788-746-5 DOI: 10.4419/867887426

download

Abstract

We elicit preferences for retirement timing in a laboratory experiment. Subjects make retirement choices under different payoff schemes that introduce variation in financial incentives. Testing ceteris paribus conditions of the financial incentive alone shows a considerable delay of retirement once early retirement becomes financially less attractive. However, varying available information as another treatment parameter reveals considerable heterogeneity in the functioning of these incentives. Subjects who are explicitly informed about the expected pension wealth respond more strongly to financial incentives compared to those who only know their pension annuity. We conclude that the financial consequences of retirement choices become more salient to the decision maker once being informed on a forward-looking measure of pension benefits.

JEL-Classification: C91, H55, J26

Keywords: Retirement age; financial incentives; information treatment; pension knowledge; financial literacy

Up