What I Know, What I Think I Know, and Whom I Know: Influence on 401(k) Plan Allocation Decisions

Employee-sponsored retirement plans (e.g., 401(k) plans) are one of the most critical benefit programs that recruit and retain talent by improving employees’ well-being and satisfaction with benefit programs. Thus, this research aims to examine what factors determine investment decision-making in employees’ retirement portfolio that will influence their retirement well-being. Using a sample of 435 employees who have 401(k) accounts, we investigated how objective financial knowledge (i.e., what I know; financial knowledge test score), financial knowledge network intensity (i.e., whom I know; social networks with people who are financially literate), and subjective (or perceived) financial knowledge (i.e., what I think I know) are associated with risk-taking and investment decision quality in their 401(k) portfolios. The results reveal the positive influences of objective financial knowledge and financial knowledge network intensity on risky asset allocations and investment decision quality. Objective finan...