2013 Conference

Financial Services

Financial Services

We examined the problem of self-control in U.S households and its effect on retirement preparedness, based on the Behavioral Lifecycle Hypothesis (Shefrin & Thaler, 1988).  Self-control is an issue in our daily lives, and is believed to lead to decision errors or lesser achievement.  Household financial decisions are no exception, and retirement preparation in particular poses a special challenge.  Therefore, we approached the topic of retirement preparedness with self-control as an influential factor.  Self-control was measured using four variables: health condition, credit attitude, saving decisions, and planning horizon.  The Survey of Consumer Finances datasets from 1995 to 2007 were mainly used, and 2010 were partially implemented.  After the analyses, we found that 54-64% of households were prepared for adequate retirement during 1995-2007.  Based on the pessimistic projection, the adequacy proportion ranged from 49% to 59%.  Our multivariate results showed that households with self-control problems were less likely to have adequate retirement preparedness.  Other than self-control variables, planned retirement age, retirement pension plan and marital status were found to be notable variables significant to retirement adequacy.