Financial Literacy, Retirement Preparation and Pension Expectations in the Netherlands

33 Pages Posted: 19 Apr 2011

See all articles by Rob J. M. Alessie

Rob J. M. Alessie

University of Groningen; Netspar; Tilburg University - Center for Economic Research (CentER)

Maarten van Rooij

De Nederlandsche Bank; Netspar

Annamaria Lusardi

Stanford University - Stanford Institute for Economic Policy Research

Multiple version iconThere are 3 versions of this paper

Date Written: January 31, 2011

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 variation for financial conditions and financial knowledge of relatives, 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.

Keywords: financial sophistication, retirement planning, retirement expectations

JEL Classification: D91, G11, D80

Suggested Citation

Alessie, Rob J. M. and van Rooij, Maarten and Lusardi, Annamaria, Financial Literacy, Retirement Preparation and Pension Expectations in the Netherlands (January 31, 2011). Netspar Discussion Paper No. 01/2011-021, Available at SSRN: https://ssrn.com/abstract=1810548 or http://dx.doi.org/10.2139/ssrn.1810548

Rob J. M. Alessie

University of Groningen ( email )

P.O. box 800
9700 AV Groningen
Netherlands
050-3637240 (Phone)

HOME PAGE: http://members.chello.nl/~r.j.m.alessie

Netspar

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.netspar.nl

Tilburg University - Center for Economic Research (CentER)

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Annamaria Lusardi

Stanford University - Stanford Institute for Economic Policy Research ( email )

366 Galvez Street
John A. and Cynthia Fry Gunn Building
Stanford, CA CA 94305
United States

HOME PAGE: http://siepr.stanford.edu/people/annamaria-lusardi

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