Hyperbolic discounting with naiveté is widely believed to provide a better explanation than exponential discounting of why people borrow so much and why they wait so long to save for retirement. We reach a different set of conclusions. We show that if financial planning is enriched to include...

We quantify the welfare gains from better retirement planning using a model in which retirement planning is time inconsistent. A modest increase in a household’s planning horizon by just a few years generates large aggregate and individual welfare gains.