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Defined Contribution Plans And The Challenge Of Financial Illiteracy, Jill E. Fisch, Annamaria Lusardi, Andrea Hasler
Defined Contribution Plans And The Challenge Of Financial Illiteracy, Jill E. Fisch, Annamaria Lusardi, Andrea Hasler
All Faculty Scholarship
Retirement investing in the United States has changed dramatically. The classic defined-benefit (DB) plan has largely been replaced by the defined contribution (DC) plan. With the latter, individual employees’ decisions about how much to save for retirement and how to invest those savings determine the benefits available upon retirement.
We analyze data from the 2015 National Financial Capability Study to show that people whose only exposure to investment decisions is by virtue of their participation in an employer-sponsored 401(k) plan are poorly equipped to make sound investment decisions. Specifically, they suffer from higher levels of financial illiteracy than other investors. …