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A Laboratory Study of the Effect of Financial Literacy Training on Retirement Savings

We report results from an economics experiment that examines the role of financial literacy in retirement savings. In the experiments, participants make decisions in a retirement savings game, in which income during working years is uncertain. Participants are nudged to varying degrees with automatic savings in each period of the game. Some participants receive financial literacy training in the form of training to compute the expected savings needed at retirement to smooth consumption over the entire life cycle. We find evidence that literacy increases savings and improves efficiency. Our finding has implications for choice architecture for retirement savings.

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