Academic journal article Journal of Family and Consumer Sciences

Women's Knowledge about Their Pension Plans

Academic journal article Journal of Family and Consumer Sciences

Women's Knowledge about Their Pension Plans

Article excerpt


Using information collected in 1999 on 976 female workers (aged 45-58 in 1999) from the National Longitudinal Survey of Young Women, this study explored the extent of the women's knowledge about their pension plans.The results reveal that only 21% of the sample felt they knew "a lot" about their pension, yet the women are getting close to retirement at the same time as they are probably approaching the peak of their earning ability. Educators and financial advisors should make a special effort to help workers, especially women, increase their human capital related to financial issues.


The "graying" of the American population is presenting new challenges for those who are aging and for the providers of services for an aging population. Women are more financially vulnerable than men because of longer life expectancy and greater likelihood of chronic disease (Steckenrider, 1998). Currently many older women depend primarily on Social Security and Medicare for retirement income and health care, respectively (Employee Benefit Research Institute, 1997a; Steckenrider, 1998). However, employee pension plans are increasingly viewed as the most appropriate alternative retirement income source for enabling older women to maintain their financial independence (Employee Benefit Research Institute, 1997b).

Employers and financial advisors encourage workers to participate in employee pension plans, but not all workers do so. In fact, the most likely participant in a workplace pension plan is a White male who has high earnings, is highly educated, aged 45-54, and working for a public sector employer (Copeland, 2002, p. 7). However, in 1999, only 63.7% of all workers were employed by an employer who sponsored a pension plan and only 52% of all workers participated in a plan (Copeland, 2002).

The level of knowledge of participants in the pension plans is another concern. Although researchers from both government and industry have examined participation in employee pension plans, there is little information on pension knowledge. Instead, researchers have focused on participation in pension plans, the amount of the contribution, number of investment alternatives, and investment choice, because this information is more readily available (Yakoboski, 2000; Yakoboski & VanDerhei, 1996).

Because pension plans are an important source of retirement income in the future, and because the employment rate of women has risen steadily over the years (Bosworth, Burtless, & Sahm, 2001), it is appropriate to learn about women's pension knowledge. If women lack knowledge about their pension plans, it is likely to contribute to their financial vulnerability in later life. Furthermore, information about the level of pension knowledge held by women will assist the developers of financial education programs and providers of services. Hence, the purpose of this study is to explore the extent of female workers' pension knowledge and the factors related to their pension knowledge by using a national sample of female workers who have an employer pension plan.


Worker's Pension Knowledge

In a study of worker's pension knowledge, Mitchell (1988) evaluated the quality of workers' information regarding pension offerings using both administrative records and worker reports of pension provisions. She found that older, better educated, upper income workers and those in large firms were better informed about their pensions. She found that women were better informed than men. However, DeVaney and Su (1997) examined four questions measuring investment knowledge held by workers in the 1996 Retirement Confidence Survey and found that female workers were less knowledgeable about investing than men. DeVaney and Chien (2001) found that older, better educated, and full-time workers were more likely to participate in retirement plans.

Theoretical Framework

This study proposes that two theories, economics of information and human capital, can contribute to an individual's level of knowledge about their pension plan. …

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