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Using Vignettes to Improve Understanding of Social Security and Annuities

Author

Listed:
  • Anya Samek
  • Arie Kapteyn
  • Andre Gray
Abstract
Evidence shows that people have difficulty understanding complex aspects of retirement planning, which leads them to under-utilize annuities and claim Social Security benefits earlier than is optimal. To target this problem, we developed vignettes about the consequences of different annuitization and claiming decisions. We evaluated our vignettes using an experiment with a representative online panel of nearly 2,000 Americans. In our experiment, respondents were either assigned to a control group with no vignette, to a written vignette, or to a video vignette. They were then asked to give advice to hypothetical persons on annuitization or Social Security claiming, and were asked factual questions about these concepts. We found evidence that being exposed to vignettes led respondents to give better advice. For example, the gap between advised claim age for a relatively healthy person versus a relatively sick person was larger by nearly a year in the vignette treatments versus the control group. Further, the vignettes increased financial literacy related to these concepts by 10-15 percentage points. Interestingly, the mode of communication did not have a significant impact – the video and written vignettes were equally effective.

Suggested Citation

  • Anya Samek & Arie Kapteyn & Andre Gray, 2019. "Using Vignettes to Improve Understanding of Social Security and Annuities," NBER Working Papers 26176, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:26176
    Note: AG
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    References listed on IDEAS

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    1. Lusardi, Annamaria & Samek, Anya & Kapteyn, Arie & Glinert, Lewis & Hung, Angela & Heinberg, Aileen, 2017. "Visual tools and narratives: new ways to improve financial literacy," Journal of Pension Economics and Finance, Cambridge University Press, vol. 16(3), pages 297-323, July.
    2. Jeffrey R. Brown & Arie Kapteyn & Erzo F. P. Luttmer & Olivia S. Mitchell & Anya Samek, 2021. "Behavioral Impediments to Valuing Annuities: Complexity and Choice Bracketing," The Review of Economics and Statistics, MIT Press, vol. 103(3), pages 533-546, July.
    3. James M. Poterba & Steven F. Venti & David A. Wise, 2011. "Were They Prepared for Retirement? Financial Status at Advanced Ages in the HRS and AHEAD Cohorts," NBER Chapters, in: Investigations in the Economics of Aging, pages 21-69, National Bureau of Economic Research, Inc.
    4. David A. Wise & Richard Woodbury, 2011. "Introduction to "Investigations in the Economics of Aging"," NBER Chapters, in: Investigations in the Economics of Aging, pages 1-18, National Bureau of Economic Research, Inc.
    5. Lusardi, Annamaria & Mitchell, Olivia S., 2007. "Baby Boomer retirement security: The roles of planning, financial literacy, and housing wealth," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 205-224, January.
    6. Annamaria Lusardi & Olivia S. Mitchell, 2005. "Financial Literacy and Planning: Implications for Retirement Wellbeing," CeRP Working Papers 46, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    7. Shlomo Benartzi & Alessandro Previtero & Richard H. Thaler, 2011. "Annuitization Puzzles," Journal of Economic Perspectives, American Economic Association, vol. 25(4), pages 143-164, Fall.
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    Cited by:

    1. Abigail Hurwitz & Olivia S. Mitchell & Orly Sade, 2021. "Longevity Perceptions and Saving Decisions during the COVID-19 Outbreak: An Experimental Investigation," AEA Papers and Proceedings, American Economic Association, vol. 111, pages 297-301, May.
    2. Tomasz Jedynak, 2022. "Does the Formulation of the Decision Problem Affect Retirement?—Framing Effect and Planned Retirement Age," IJERPH, MDPI, vol. 19(4), pages 1-30, February.
    3. Stefania Basiglio & Noemi Oggero, 2020. "The Effects of Pension Information on Individuals’ Economic Outcomes: A Survey," Economies, MDPI, vol. 8(3), pages 1-16, August.
    4. Merkoulova, Yulia & Veld, Chris, 2022. "Stock return ignorance," Journal of Financial Economics, Elsevier, vol. 144(3), pages 864-884.
    5. Bucher-Koenen, Tabea & Knebel, Caroline & Weber, Martin, 2023. "Do individuals accept fluctuations in pension income?," ZEW Discussion Papers 23-019, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    JEL classification:

    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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