TY  - BOOK
AU  - Li,James J.
AU  - Mitchell,Olivia S.
AU  - Zhu,Christina
ED  - National Bureau of Economic Research.
TI  - Household Investment in 529 College Savings Plans and Information Processing Frictions
T2  - NBER working paper series
PY  - 2023///
CY  - Cambridge, Mass.
PB  - National Bureau of Economic Research
KW  - Portfolio Choice • Investment Decisions
KW  - jelc
KW  - Information and Market Efficiency • Event Studies • Insider Trading
KW  - International Financial Markets
KW  - Non-bank Financial Institutions • Financial Instruments • Institutional Investors
KW  - Financial Literacy
N1  - January 2023; Hardcopy version available to institutional subscribers
N2  - We investigate how information processing frictions contribute to household suboptimal saving and investment behavior. We find that 60% of open accounts in college 529 savings plans are invested suboptimally due to high expenses and tax inefficiency. Such investments yield an expected loss of 9% over the accounts' projected lifetimes. Consistent with information processing frictions contributing to inefficient investment, the extent of investment in suboptimal home-state accounts decreases with household financial literacy and increases with plan document disclosure complexity. Overall, our results suggest that information processing frictions shape households' suboptimal investment in college savings plans and reduce their financial well-being
UR  - https://www.nber.org/papers/w30848
UR  - http://dx.doi.org/10.3386/w30848
ER  -