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Abstract
The majority of employees in the private sector no longer have access to defined benefit (DB) retirement plans, while public sector employees often have a choice between a DB and a defined contribution (DC) plan. This research utilized a survey of graduate students to assess their preference for DB versus DC plans controlling for financial literacy, risk tolerance, and time orientation as well as selected demographic characteristics. When given the choice between the two types of retirement plans, individuals who were more financially literate as indicated by higher numeracy scores were more likely to select a DC plan over a DB plan. Similarly, individuals who had higher risk tolerance scores were more likely to select a DC plan. Individuals whose time orientation scores indicated that they were more focused on the immediate were more likely to select a DB plan. In addition, a more positive outlook on the economy and a more positive outlook on one’s personal financial condition were correlated with an increased likelihood of selecting a DC plan. The expectation of receiving retirement income from an existing DB plan was correlated with an increased likelihood of selecting a DB plan. This research may be useful to employers in determining the types of retirement plans that they choose to offer their employees. If employers are able to provide information about the factors commonly associated with the choice of a DB plan or a DC plan to employees making a choice between these two retirement plan choices, the result may be both improved satisfaction and increased retention among employees.