Clark, Robert L
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Publication Financial Knowledge and 401(k) Investment Performance: A Case Study(2015-06-01) Clark, Robert; Mitchell, Olivia S; Lusardi, AnnamariaWe explore whether investors who are more financially knowledgeable earn more on their retirement plan investments compared to their less sophisticated counterparts, using a unique new dataset linking administrative data on investment performance and financial knowledge. Results show that the most financially knowledgeable investors: (a) held 18 percentage points more stock than their least knowledgeable counterparts; (b) could anticipate earning 8 basis points per month more in excess returns; (c) had 40% higher portfolio volatility; and (d) held portfolios with about 38% less idiosyncratic risk, as compared to their least savvy counterparts. Our results are qualitatively similar after controlling on observables as well as modeling sample selection. We also examine portfolio changes to assess the potential impact of the financial literacy intervention. Controlling on other factors, those who elected to take the Financial Literacy survey boosted their equity allocations by 66 basis points and their monthly expected excess returns rose by 2.3 basis points; no significant difference in volatility or nonsystematic risk was detected before versus after the survey. While these findings relate to only one firm, we anticipate that they may spur other efforts to enhance financial knowledge in the workplace.Publication The Evolution of Public Sector Pension Plans in the United States(2008-10-01) Clark, Robert L; Craig, Lee A; Ahmed, NeveenMunicipal governments in the U.S. began offering retirement plans for their workers in the mid-19th century, and state governments followed in the early 20th century. As these plans matured, they confronted economic, social, and political challenges, including the creation of the Social Security system, which subsequently shaped their structure, governance, and generosity. After reviewing this history, we employ data from all 50 states to estimate a pension benefit equation for hypothetical workers and explain differences in the generosity of plans across states and types of workers covered. We show that population growth, plan funding, union representation, and participation in Social Security influenced the generosity of the plans.Publication Adopting Hybrid Pension Plans: Effects of Economic Crisis and Regulatory Reform(2011-09-01) Clark, Robert L; Glickstein, Alan; Hill, TomekaThis chapter examines the factors that affected plan sponsors’ decisions to convert a traditional defined benefit (DB) plan to a hybrid design during years 2000-2010. We use combined plan level data from Form 5500 filings and financial information from 10-Ks of Fortune 1000 companies to ascertain how the financial status of the plan sponsor, pension plan funding, and costs affected a decision to convert from a traditional DB plan to a hybrid design. We also explore the timing of such conversions relative to major changes in federal regulations, specifically the passage of the Pension Protection Act of 2006 and the ensuing regulations as well as in response to the economic crisis. We examine whether firms that converted in the early part of the decade did so for reasons that were different than those who converted in later part of the decade. We assess the role of the financial status of the plan sponsor in the conversion decision and compare this to the influence of the plan funding ratio, the investment patterns, and the overall plan cost. We also describe the influence the economic crisis is likely to have on the choice of plan type.Publication Evaluating the Effects of a Low-Cost, Online Financial Education Program(2024-02-29) Clark, Robert LThis paper provides evidence on how a low-cost, online, and scalable financial education program influences older participants’ financial knowledge. We tested the program using a field experiment that included short stories covering three fundamental financial education topics: compound interest, risk diversification, and inflation. Two surveys were administered eight months apart to measure the effects of those stories on participants' short-term and longer-term knowledge and financial distress indicators. We show that the risk diversification story was the most effective at improving participants' knowledge, in both the short and longer term. The compound interest and inflation stories significantly increased participants' knowledge in the short term, but the gain in financial literacy declined over time.Publication Financial Fragility, Financial Resilience, and Pension Distributions(2024-01) Clark, Robert LWe evaluate Americans’ financial robustness during the Covid-19 pandemic, using measures of financial resilience and financial fragility derived from US surveys of persons age 45-75 from 2020 to 2022. We analyze which factors were associated with resilience and fragility, discuss how these measures changed during the pandemic, and assess whether pre-pandemic resilience led to better outcomes during the period. Results show that stronger resilience was protective in terms of financial fragility, and financial literacy was associated with greater pension knowledge as well as better information about retirement plan distribution options. The more financially resilient were also more likely to select an annuity as a pension payout. Our findings imply that policies and programs enhancing financial resilience could help households better withstand economic shocks and address income needs in times of crisis.