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Financial literacy and retirement preparedness: Evidence and implications for financial education programs

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  • Lusardi, Annamaria
  • Mitchell, Olivia S.

Abstract

Economists are beginning to investigate the causes and consequences of financial illiteracy to better understand why retirement planning is lacking and why so many households arrive close to retirement with little or no wealth. Our review reveals that many households are unfamiliar with even the most basic economic concepts needed to make saving and investment decisions. Such financial illiteracy is widespread: the young and older people in the United States and other countries appear woefully under-informed about basic financial concepts, with serious implications for saving, retirement planning, mortgages, and other decisions. In response, governments and several nonprofit organizations have undertaken initiatives to enhance financial literacy. The experience of other countries, including a saving campaign in Japan as well as the Swedish pension privatization program, offers insights into possible roles for financial literacy and saving programs. --

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Bibliographic Info

Paper provided by Center for Financial Studies (CFS) in its series CFS Working Paper Series with number 2007/15.

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Date of creation: 2007
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Handle: RePEc:zbw:cfswop:200715

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Keywords: Financial and Economics Knowledge; Retirement Seminars; Financial Decisionmaking.;

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References

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  1. Patrick J. Bayer & B. Douglas Bernheim & John Karl Scholz, 2009. "The Effects Of Financial Education In The Workplace: Evidence From A Survey Of Employers," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 47(4), pages 605-624, October.
  2. Sodini, Paolo & Calvet, Laurent E. & Campbell, John, 2007. "Down or Out: Assessing the Welfare Costs of Household Investment Mistakes," Scholarly Articles 3122488, Harvard University Department of Economics.
  3. Martin Browning & Annamaria Lusardi, 1995. "Household Saving: Micro Theories and Micro Facts," Department of Economics Working Papers 1995-02, McMaster University.
  4. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2004. "Saving or Retirement on the Path of Least Resistance," Levine's Bibliography 122247000000000606, UCLA Department of Economics.
  5. Annamarie Lusardi & Olivia S. Mitchell, 2005. "Financial Literacy and Planning: Implications for Retirement Wellbeing," Working Papers, University of Michigan, Michigan Retirement Research Center wp108, University of Michigan, Michigan Retirement Research Center.
  6. Sewin Chan & Ann Huff Stevens, 2003. "What You Don't Know Can't Help You: Pension Knowledge and Retirement Decision Making," NBER Working Papers 10185, National Bureau of Economic Research, Inc.
  7. Annamaria Lusardi & Olivia S. Mitchell, 2006. "Baby Boomer Retirement Security: the Roles of Planning, Financial Literacy, and Housing Wealth," NBER Working Papers 12585, National Bureau of Economic Research, Inc.
  8. Bernheim, B. Douglas & Garrett, Daniel M., 2003. "The effects of financial education in the workplace: evidence from a survey of households," Journal of Public Economics, Elsevier, Elsevier, vol. 87(7-8), pages 1487-1519, August.
  9. Olivia S. Mitchell, 1987. "Worker Knowledge of Pension Provisions," NBER Working Papers 2414, National Bureau of Economic Research, Inc.
  10. Marianne A. Hilgert & Jeanne M. Hogarth & Sondra G. Beverly, 2003. "Household financial management: the connection between knowledge and behavior," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), Board of Governors of the Federal Reserve System (U.S.), issue Jul, pages 309-322.
  11. Douglas D. Bernheim, . "Financial Illiteracy, Education, and Retirement Saving," Pension Research Council Working Papers, Wharton School Pension Research Council, University of Pennsylvania 96-7, Wharton School Pension Research Council, University of Pennsylvania.
  12. Giovanni Mastrobuoni, 2007. "Do better–informed workers make better retirement choices? A test based on the Social Security Statement," Carlo Alberto Notebooks, Collegio Carlo Alberto 51, Collegio Carlo Alberto.
  13. Oecd, 2005. "Improving Financial Literacy: Analysis of Issues and Policies," Financial Market Trends, OECD Publishing, OECD Publishing, vol. 2005(2), pages 111-123.
  14. Alberto Arenas de Mesa & David Bravo & Jere R. Behrman & Olivia S. Mitchell & Petra E. Todd, 2006. "The Chilean Pension Reform Turns 25: Lessons From the Social Protection Survey," NBER Working Papers 12401, National Bureau of Economic Research, Inc.
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