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Financial Literacy and Financial Sophistication Among Older Americans

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  • Annamaria Lusardi
  • Olivia S. Mitchell
  • Vilsa Curto

Abstract

This paper analyzes new data on financial literacy and financial sophistication from the 2008 Health and Retirement Study. We show that financial literacy is lacking among older individuals and for the first time explore additional questions on financial sophistication which proves even scarcer. For this sample of older respondents over the age of 55, we find that people lack even a rudimentary understanding of stock and bond prices, risk diversification, portfolio choice, and investment fees. In view of the fact that individuals are increasingly required to take on responsibility for their own retirement security, this lack of knowledge has serious implications.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 15469.

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Date of creation: Nov 2009
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Handle: RePEc:nbr:nberwo:15469

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  1. Annamaria Lusardi & Olivia S. Mitchell, 2008. "Planning and Financial Literacy: How Do Women Fare?," NBER Working Papers 13750, National Bureau of Economic Research, Inc.
  2. James J. Choi & David Laibson & Brigitte C. Madrian, 2010. "Why Does the Law of One Price Fail? An Experiment on Index Mutual Funds," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 23(4), pages 1405-1432, April.
  3. Lusardi, Annamaria & Mitchell, Olivia S. & Curto, Vilsa, 2010. "Financial literacy among the young: Evidence and implications for consumer policy," CFS Working Paper Series 2010/09, Center for Financial Studies (CFS).
  4. Maarten vanRooij & Annamaria Lusardi & Rob Alessie, 2007. "Financial Literacy and Stock Market Participation," Working Papers, University of Michigan, Michigan Retirement Research Center wp162, University of Michigan, Michigan Retirement Research Center.
  5. Kenneth R. French & James M. Poterba, 1991. "Investor Diversification and International Equity Markets," NBER Working Papers 3609, National Bureau of Economic Research, Inc.
  6. Annamaria Lusardi & Olivia S. Mitchell, 2009. "How Ordinary Consumers Make Complex Economic Decisions: Financial Literacy and Retirement Readiness," CeRP Working Papers 90, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  7. Campbell, John, 2006. "Household Finance," Scholarly Articles 3157877, Harvard University Department of Economics.
  8. Checchi,Daniele, 2008. "The Economics of Education," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521066464.
  9. Annamaria Lusardi & Olivia S Mitchelli, 2007. "Financial Literacy and Retirement Preparedness: Evidence and Implications for Financial Education," Business Economics, Palgrave Macmillan, vol. 42(1), pages 35-44, January.
  10. Annamaria Lusardi, 2008. "Household Saving Behavior: The Role of Financial Literacy, Information, and Financial Education Programs," NBER Working Papers 13824, National Bureau of Economic Research, Inc.
  11. David Bravo Urrutia & Olivia S. Mitchell & Petra Todd, 2007. "Learning from the Chilean Experience: The Determinants of Pension Switching," Working Papers, University of Chile, Department of Economics wp266, University of Chile, Department of Economics.
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Cited by:
  1. Clark, Gordon & El Mekkaoui de Freitas, Najat & Legendre, Bérangère, 2012. "Poverty Risk and Holding Behavior Among Retirees," Economics Papers from University Paris Dauphine 123456789/11143, Paris Dauphine University.
  2. Annamaria Lusardi & Olivia S. Mitchell, 2013. "Older Adult Debt and Financial Frailty," Working Papers, University of Michigan, Michigan Retirement Research Center wp291, University of Michigan, Michigan Retirement Research Center.
  3. Guiso, Luigi & Sodini, Paolo, 2012. "Household Finance: An Emerging Field," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8934, C.E.P.R. Discussion Papers.
  4. Lusardi, Annamaria & Mitchell, Olivia S., 2011. "Financial literacy around the world: an overview," Journal of Pension Economics and Finance, Cambridge University Press, Cambridge University Press, vol. 10(04), pages 497-508, October.
  5. Najat El Mekkaoui De Freitas & Bérangère Legendre & Gordon Clark, 2013. "Individual Private Retirement Insurances: holding behaviours among pensioners," Post-Print hal-00951881, HAL.
  6. Ketcham, Jonathan D. & Lucarelli, Claudio & Miravete, Eugenio J & Roebuck, M Christopher, 2011. "Sinking, Swimming, or Learning to Swim in Medicare Part D," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8585, C.E.P.R. Discussion Papers.
  7. Joanne W. Hsu, 2011. "Aging and Strategic Learning: The Impact of Spousal Incentives on Financial Literacy," NFI Working Papers 2011-WP-06, Indiana State University, Scott College of Business, Networks Financial Institute.

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