Abstract - Financial Literacy, Retirement Planning, and Retirement Accumulation

Financial literacy and schooling attainment have been linked to household wealth accumulation
patterns, but prior findings may be biased due to noisy measures of financial literacy or
unobserved factors such as ability, intelligence, and motivation that could directly affect pension
wealth accumulation but also enhance financial literacy. Using a new household dataset, we
isolate the causal effects of financial literacy and schooling on pension accumulation with an
instrumental variables approach. We show that both financial literacy and schooling attainment
are importantly associated with retirement saving outcomes; our IV estimates indicate even
stronger effects of financial literacy on pension wealth and density of pension contributions,
particularly for the least-educated.

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