Authors:

• Robert Clark
• Annamaria Lussardi
• Olivia S. Mitchell

Overview:

This paper uses the administrative data of all active employees of the Federal Reserve System of the USA to examine enrollment and contributions to the Thrift Saving Plan (TSP, a defined-contribution pension program similar to the 401k, offered to U.S. civil service workers). The authors mainly found that:

• Federal Reserve employees have substantially higher levels of financial literacy than the majority of the population; they also found that these workers with greater financial literacy are more likely to participate in its defined-contribution plan.
• Employees with greater financial literacy contribute 3 percentage points more of their income than workers with less knowledge, and also maintain a higher percentage of equities in their portfolios.
• Workers who completed a training course were more likely to begin to contribute to the plan, and were less likely to stop contributing to it.

The authors conclude that learning programs have a significant impact on the decisions of workers’ retirement savings, and that, consistent with other studies, higher levels of financial literacy have a significant impact on retirement savings patterns.

To review the study in detail, please download it here.