Special Issue Article

Inappropriate Confidence and Retirement Planning: Four Studies with a National Sample

  1. Andrew M. Parker1,*,
  2. Wändi Bruine de Bruin2,3,
  3. Joanne Yoong4,
  4. Robert Willis5

Article first published online: 15 JUN 2011

DOI: 10.1002/bdm.745

Issue

Journal of Behavioral Decision Making

Journal of Behavioral Decision Making

Special Issue: Individual Differences in Decision-Making Competence

Volume 25, Issue 4, pages 382–389, October 2012

Additional Information

How to Cite

Parker, A. M., de Bruin, W. B., Yoong, J. and Willis, R. (2012), Inappropriate Confidence and Retirement Planning: Four Studies with a National Sample. J. Behav. Decis. Making, 25: 382–389. doi: 10.1002/bdm.745

Author Information

  1. 1

    RAND Corporation, Pittsburgh, PA, USA

  2. 2

    Department of Social and Decision Sciences, Carnegie Mellon University, Pittsburgh, PA, USA

  3. 3

    Department of Engineering and Public Policy, Carnegie Mellon University, Pittsburgh, PA, USA

  4. 4

    RAND Corporation, Arlington, VA, USA

  5. 5

    Department of Economics, University of Michigan, Ann Arbor, MI, USA

*Andrew Parker, RAND Corporation, 4570 Fifth Avenue, Suite 600, Pittsburgh, PA 15213, USA. E-mail: parker@rand.org

Publication History

  1. Issue published online: 6 AUG 2012
  2. Article first published online: 15 JUN 2011

Funded by

  • RAND Center for Financial and Economic Decision Making
  • National Institute on Aging. Grant Numbers: R01AG20717, P01AG026571

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Keywords:

  • confidence;
  • knowledge;
  • metacognition;
  • competence;
  • retirement

ABSTRACT

Financial decisions about investing and saving for retirement are increasingly complex, requiring financial knowledge and confidence in that knowledge. Few studies have examined whether direct assessments of individuals' confidence are related to the outcomes of their financial decisions. Here, we analyzed data from a national sample recruited through RAND's American Life Panel, an Internet panel study of US adults aged 18–88 years. We examined the relationship of confidence with self-reported and actual financial decisions, using four different tasks, each performed by overlapping samples of American Life Panel participants. The four tasks were designed by different researchers for different purposes, using different methods to assess confidence. Yet, measures of confidence were correlated across tasks, and results were consistent across methodologies. Confidence and knowledge showed only modest positive correlations. However, even after controlling for actual knowledge, individuals with greater confidence were more likely to report financial planning for retirement and to successfully minimize fees on a hypothetical investment task. Implications for the role of confidence in investment behavior (even if it is unjustified) is discussed. Copyright © 2011 John Wiley & Sons, Ltd.

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