JSIT20-03: Pension Plan Types and Social Security Knowledge: New Survey Evidence

Abstract

Knowledge of the Social Security (SS) Old-Age and Survivors Insurance program affects people’s work, consumption, and savings decisions before retirement and in turn impacts financial well-being in retirement. Despite extant literature on retirement planning and SS claiming decisions, little is known about the public’s SS knowledge as it intersects with pension plans, two pillars of the “three-legged stool” of retirement security. While research suggests that individuals with defined-contribution (DC) plans, especially men, are more likely to possess higher financial literacy than those with defined-benefit (DB) plans, it remains unclear whether individuals’ pension types are associated with their SS knowledge and whether these associations differ by gender. Utilizing merged data from the Understanding America Study, this study explores how the levels of SS knowledge vary across segments of the population by pension status (DB, DC, both, neither), and whether gender moderated the associations between pension type and SS knowledge. Results indicate that relative to those with no pension, people with a pension consistently had higher odds of correctly answering questions assessing SS knowledge. Specifically, those with DC only had higher odds of correctly answering questions on disability benefits, age adjustment, claiming upon retirement, and spousal benefits. Those with DC and DB had higher odds of correctly answering the question on spousal benefits. Women with no pension tend to have lower overall SS knowledge relative to women with DB only. These results suggest that individuals without any type of pension, especially women, could benefit from communication efforts to enhance their SS knowledge.