Tax-Sheltered Retirement Accounts: Can Financial Education Improve Decisions?

Martin Boyer, Philippe d’Astous and Pierre-Carl Michaud
Working Paper #19-02
Research Chair in Intergenerational Economics formerly the Industrial Alliance Chair) – February 2019

We conduct a stated-choice experiment to analyze the decision to contribute to front- or back-loaded tax-sheltered savings accounts. Our experimental design includes a randomized financial education treatment that provides information on the two types of accounts. We assess whether respondents learn about the tax implications of these accounts, and whether they make better contribution choices when exposed to the financial education intervention. We find that, relative to a control group, our intervention improves both the understanding of the tax implications of the savings accounts (an increase of 6 to 15 points on a score of 100) and the quality of contribution decisions, improving the well-being of respondents by about $140 in each scenario presented to them.