Working Paper: NBER ID: w17863
Authors: Annamaria Lusardi; Olivia S. Mitchell; Vilsa Curto
Abstract: This paper examines data on financial sophistication among the U.S. older population, using a special-purpose module implemented in the Health and Retirement Study. We show that financial sophistication is deficient for older respondents (aged 55+). Specifically, many in this group lack a basic grasp of asset pricing, risk diversification, portfolio choice, and investment fees. Subpopulations with particular deficits include women, the least educated, persons over the age of 75, and non-Whites. In view of the fact that people are increasingly being asked to take on responsibility for their own retirement security, such lack of knowledge can have serious implications.
Keywords: financial literacy; financial sophistication; older population; retirement security
JEL Codes: D91; G11; J14; J18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| financial sophistication (G53) | poor financial decision-making (G41) |
| low financial sophistication (G53) | poor financial decision-making outcomes (G41) |
| financial literacy (G53) | informed financial decisions (G11) |
| demographic variables (age, gender, education) (J21) | financial sophistication (G53) |
| poor financial decision-making (G41) | retirement security management (H55) |
| financial knowledge deficits (G53) | poor financial decision-making (G41) |