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Financial Literacy, Retirement Preparation and Pension Expectations in the Netherlands

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  • Rob J. Alessie
  • Maarten van Rooij
  • Annamaria Lusardi

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 variables estimates for financial knowledge, 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.

Suggested Citation

  • Rob J. Alessie & Maarten van Rooij & Annamaria Lusardi, 2011. "Financial Literacy, Retirement Preparation and Pension Expectations in the Netherlands," NBER Working Papers 17109, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:17109
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    1. van Rooij, Maarten & Lusardi, Annamaria & Alessie, Rob, 2011. "Financial literacy and stock market participation," Journal of Financial Economics, Elsevier, vol. 101(2), pages 449-472, August.
    2. van Rooij, Maarten C.J. & Kool, Clemens J.M. & Prast, Henriette M., 2007. "Risk-return preferences in the pension domain: Are people able to choose?," Journal of Public Economics, Elsevier, vol. 91(3-4), pages 701-722, April.
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    4. Benito Arruñada, 2010. "Protestants and Catholics: Similar Work Ethic, Different Social Ethic," Economic Journal, Royal Economic Society, vol. 120(547), pages 890-918, September.
    5. Bucher-Koenen, Tabea & Lusardi, Annamaria, 2011. "Financial literacy and retirement planning in Germany," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(4), pages 565-584, October.
    6. van Rooij, Maarten C.J. & Lusardi, Annamaria & Alessie, Rob J.M., 2011. "Financial literacy and retirement planning in the Netherlands," Journal of Economic Psychology, Elsevier, vol. 32(4), pages 593-608, August.
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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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