Social Security Bulletin • Vol. 64 • No. 4 • 2001/200248 Does Retirement Education Teach People to Save Pension Distributions?

As defined contribution pension plans have become increasingly common over the past two decades, so have lump sum distributions from those plans. Employ-ees who elect such a distribution take the balance of their pension account with them when they leave a job. They can then choose to maintain the funds in accounts designated for retirement, invest them in other saving vehicles, or spend them. If spent pension distribu-tions are not replaced by other savings, however, the future elderly are unlikely to be able to maintain a desirable stan-dard of living. With employee-funded pensions expected to play an increasingly important role in financing Americans’ retirement, saving these funds is essen-tial. This article is the first to examine the relationship between retirement educa-tion—specifically, meetings sponsored by employers or by public and private institutions—and the saving of lump sum distributions. Two definitions of saving are used: one that includes reinvestment only in tax-deferred saving vehicles, and a broader one that includes tax-deferred vehicles, general saving vehicles (stocks, bonds, savings accounts, and so on), and paying off debt. The analysis also Education about retirement affects how employees use distributions from their defined contribution pension plans. Retirement education substantially increases the probability that participants age 40 and under will save a distribution but decreases the probability that college graduates and women will save one. These important differentials are concealed by estimates of the effect of retirement education on participants generally. *The author is an economist with the Division of Policy Evalu