The Impact of Individual Investment Behavior for Retirement Welfare: Evidence from the United States and Germany

An important topic for future research is determining which public policy measure or
mix of measures—for example, investments in financial education²⁴ or advice for
asset allocation default options in pension plans²⁵—should be implemented to
achieve the maximum welfare gain. Combining knowledge about the welfare
contributions of various policy measures with the results on the location of welfare
losses presented in this paper should help considerably to meet the demographic
challenges ahead.

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²⁴ See footnote 3.

²⁵ The power of default options—the tendency that pension plan members stick to
predefined asset allocations—is demonstrated in Beshears et al. (2006). Thus, one can
reach desired asset allocation results while avoiding too much regulatory force.

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