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Financial literacy and retirement planning in the United States

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  • LUSARDI, ANNAMARIA
  • MITCHELL, OLIVIA S.

Abstract

We examine financial literacy in the United States using the new National Financial Capability Study, wherein we demonstrate that financial literacy is particularly low among the young, women, and the less-educated. Moreover, Hispanics and African-Americans score the least well on financial literacy concepts. Interestingly, all groups rate themselves as rather well-informed about financial matters, notwithstanding their actual performance on the key literacy questions. Finally, we show that people who score higher on the financial literacy questions are also much more likely to plan for retirement, which is likely to leave them better positioned for old-age. Our results will inform those seeking to target financial literacy programs to those in most need.

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Bibliographic Info

Article provided by Cambridge University Press in its journal Journal of Pension Economics and Finance.

Volume (Year): 10 (2011)
Issue (Month): 04 (October)
Pages: 509-525

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Handle: RePEc:cup:jpenef:v:10:y:2011:i:04:p:509-525_00

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References

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  1. Maarten vanRooij & Annamaria Lusardi & Rob Alessie, 2007. "Financial Literacy and Stock Market Participation," Working Papers wp162, University of Michigan, Michigan Retirement Research Center.
  2. John Ameriks & Andrew Caplin & John Leahy, 2003. "Wealth Accumulation And The Propensity To Plan," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 1007-1047, August.
  3. Xavier Gabaix & John C. Driscoll & David Laibson & Sumit Agarwal, 2008. "The Age of Reason: Financial Decisions Over the Lifecycle," 2008 Meeting Papers 322, Society for Economic Dynamics.
  4. Christelis, Dimitris & Jappelli, Tullio & Padula, Mario, 2008. "Cognitive abilities and portfolio choice," CFS Working Paper Series 2008/35, Center for Financial Studies (CFS).
  5. Jere R. Behrman & Olivia S. Mitchell & Cindy Soo & David Bravo, 2010. "Financial Literacy, Schooling, and Wealth Accumulation," NBER Working Papers 16452, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. M. Fort & F. Manaresi & S. Trucchi, 2012. "Banks Information Policies, Financial Literacy and Household Wealth," Working Papers wp852, Dipartimento Scienze Economiche, Universita' di Bologna.
  2. Julie Agnew & Joshua Hurwitz, 2013. "Financial Education and Choice in State Public Pension Systems," NBER Working Papers 18907, National Bureau of Economic Research, Inc.
  3. Fernanda Nechio & Carlos Carvalho, 2012. "Do People Understand Monetary Policy?," 2012 Meeting Papers 426, Society for Economic Dynamics.
  4. Robert L. Clark & Annamaria Lusardi & Olivia S. Mitchell, 2014. "Financial Knowledge and 401(k) Investment Performance," NBER Working Papers 20137, National Bureau of Economic Research, Inc.
  5. Dick, Christian D. & Jaroszek, Lena M., 2013. "Knowing what not to do: Financial literacy and consumer credit choices," ZEW Discussion Papers 13-027, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  6. Annamaria Lusardi & Olivia S. Mitchell, 2013. "The Economic Importance of Financial Literacy: Theory and Evidence," NBER Working Papers 18952, National Bureau of Economic Research, Inc.
  7. Annamaria Lusardi, 2012. "Numeracy, financial literacy, and financial decision-making," NBER Working Papers 17821, National Bureau of Economic Research, Inc.
  8. Klapper, Leora & Lusardi, Annamaria & Panos, Georgios A., 2013. "Financial literacy and its consequences: Evidence from Russia during the financial crisis," Journal of Banking & Finance, Elsevier, vol. 37(10), pages 3904-3923.
  9. Paul Gerrans & Craig Speelman & Guillermo Campitelli, 2014. "The Relationship Between Personal Financial Wellness and Financial Wellbeing: A Structural Equation Modelling Approach," Journal of Family and Economic Issues, Springer, vol. 35(2), pages 145-160, June.
  10. Annamaria Lusardi & Carlo de Bassa Scheresberg, 2013. "Financial Literacy and High-Cost Borrowing in the United States," NBER Working Papers 18969, National Bureau of Economic Research, Inc.
  11. Brown, Martin & Hoffmann, Matthias, 2013. "Mortgage Relationships," Working Papers on Finance 1310, University of St. Gallen, School of Finance.
  12. Lusardi, Annamaria & Mitchell, Olivia S. & Curto, Vilsa, 2012. "Financial sophistication in the older population," CFS Working Paper Series 2012/08, Center for Financial Studies (CFS).
  13. Olivia S. Mitchell & Stephen Utkus, 2012. "Target-Date Funds in 401(k) Retirement Plans," NBER Working Papers 17911, National Bureau of Economic Research, Inc.
  14. Frank Erp & Niels Vermeer & Daniel Vuuren, 2014. "Non-financial Determinants of Retirement: A Literature Review," De Economist, Springer, vol. 162(2), pages 167-191, June.
  15. Robin L. Lumsdaine & Rogier J.D. Potter van Loon, 2013. "Wall Street vs. Main Street: An Evaluation of Probabilities," NBER Working Papers 19103, National Bureau of Economic Research, Inc.
  16. Leonardo Bursztyn & Florian Ederer & Bruno Ferman & Noam Yuchtman, 2012. "Understanding Peer Effects in Financial Decisions: Evidence from a Field Experiment," NBER Working Papers 18241, National Bureau of Economic Research, Inc.
  17. Alexander Klos, 2013. "Myopic loss aversion: Potential causes of replication failures," Judgment and Decision Making, Society for Judgment and Decision Making, vol. 8(5), pages 617-629, September.
  18. Corsini, Lorenzo & Spataro, Luca, 2011. "Optimal decisions on pension plans in the presence of financial literacy costs and income inequalities," MPRA Paper 30946, University Library of Munich, Germany.

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