Around the globe, low retirement savings threaten the economic well-being of large portions of the population. To better understand what promotes retirement sufficiency, we investigate variables that correlate with retirement savings behaviors.
Using the 2021 National Financial Capability Study data, we examine factors correlated with having a retirement plan, contributing to a retirement plan and avoiding the depletion of retirement savings.
While strong financial behavior and actual financial literacy are each connected to retirement plan participation, the link attributed to strong financial behavior is nearly twice as strong as that for actual financial literacy. Strong financial behavior correlates strongly with leaving retirement savings in place. Having a financial literacy blind spot (i.e. not knowing that one does not know about financial literacy) correlates strongly with retirement savings depletion. Financial anxiety does not correlate with retirement plan participation or depletion.
Our measure of strong financial behavior explains much more variation in retirement savings than variables commonly explored in the retirement literature. Individuals facing income constraints without a financial literacy blind spot are less likely to deplete their retirement savings. Conversely, those with a financial literacy blind spot tend to deplete their retirement savings regardless of their financial vulnerability or strength. Our findings hold even when restricting the sample to households with incomes below the median ($75,000), as well as above the median, indicating that policies targeting non-income variables could enhance retirement outcomes.
