Pension Plan Distributions: The Importance of Financial Literacy

Robert L. Clark, Melinda S. Morrill and Steven G. Allen

in Financial Literacy: Implications for Retirement Security and the Financial Marketplace

Published in print October 2011 | ISBN: 9780199696819
Published online January 2012 | e-ISBN: 9780191732089 | DOI:

Series: Pensions Research Council

Pension Plan Distributions: The Importance of Financial Literacy

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This chapter examines workers' plans to take lump sum distributions versus life annuities from employer retirement plans. The analysis is based on before and after surveys of retirement eligible workers who attended employer-provided retirement planning seminars. We consider workers' planned distributional choices from both defined benefit and 401(k) plans. A minority of respondents plan to take the non-default options, highlighting the importance of framing. Additionally, higher financial literacy is associated with lower rates of annuitization in both plans. We explore how participants change their planned distribution choices after attending seminars that enhance financial knowledge and understanding of retirement plans.

Keywords: plans; retirement; annuity; workers; individuals; distribution; planning; seminar; annuities; benefit

Chapter.  7615 words.  Illustrated.

Subjects: Pensions

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