Working Paper: NBER ID: w17078
Authors: Annamaria Lusardi; Olivia S. Mitchell
Abstract: Relatively little is known about why people fail to plan for retirement and whether planning and information costs might affect retirement saving patterns. This paper reports on a purpose-built survey module on planning and financial literacy for the Health and Retirement Study which measures how people make financial plans, collect the information needed to make these plans, and implement the plans. We show that financial illiteracy is widespread among older Americans, particularly women, minorities, and the least educated. We also find that the financially savvy are more likely to plan and to succeed in their planning, and they rely on formal methods such as retirement calculators, retirement seminars, and financial experts, instead of family/relatives or co-workers. These results have implications for targeted financial education efforts.
Keywords: financial literacy; retirement planning; wealth accumulation; economic wellbeing
JEL Codes: D91
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| financial literacy (G53) | retirement planning (J26) |
| financial literacy (G53) | execution of retirement plans (J26) |
| financial literacy (G53) | use of formal planning tools (L52) |
| financial literacy (G53) | understanding of key financial concepts (G53) |
| lack of financial literacy (G53) | poor retirement outcomes (J26) |
| demographic variables (J10) | confounding of financial literacy and retirement planning (G53) |