Financial advice, financial literacy and social interaction: what matters to retirement saving decisions?

We analyze the effect of financial advice, financial literacy and social interaction on households' retirement saving decisions. Financial advice is the only factor that positively influences individuals' decisions to participate in a retirement plan, while only financial literacy increases risky asset allocation. These two important factors both influence the ultimate retirement account balance. Viewed collectively, we propose that financial advice and financial literacy benefit retirement saving decisions through different channels, they complement each other and they jointly lead to a better ultimate outcome. The evidence is consistent when we further consider quality of advice and self-rated financial literacy. However, social interaction is of little help in facilitating better retirement saving decisions.