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Are financial retirement incentives more effective if pension knowledge is high?

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  • GIESECKE, MATTHIAS
  • YANG, GUANZHONG

Abstract

We study the combined effects of financial incentives and information provision on retirement behavior. To elicit preferences for retirement timing in the laboratory, we ask subjects to 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 with those who only know their pension annuity. Being informed about a forward-looking measure of pension benefits makes the financial consequences of retirement choices more salient to the decision maker.

Suggested Citation

  • Giesecke, Matthias & Yang, Guanzhong, 2018. "Are financial retirement incentives more effective if pension knowledge is high?," Journal of Pension Economics and Finance, Cambridge University Press, vol. 17(3), pages 278-315, July.
    • Handle: RePEc:cup:jpenef:v:17:y:2018:i:03:p:278-315_00
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    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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