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Financial sophistication in the older population

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  • Lusardi, Annamaria
  • Mitchell, Olivia S.
  • Curto, Vilsa

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. --

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Bibliographic Info

Paper provided by Center for Financial Studies (CFS) in its series CFS Working Paper Series with number 2012/08.

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Date of creation: 2012
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Handle: RePEc:zbw:cfswop:201208

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Keywords: Financial Knowledge; Older Population; Question Framing; Male and Female Differences; Retirement Security;

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References

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  1. Annamaria Lusardi & Peter Tufano, 2009. "Debt Literacy, Financial Experiences, and Overindebtedness," CeRP Working Papers 83, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  2. John Y. Campbell, 2006. "Household Finance," Journal of Finance, American Finance Association, American Finance Association, vol. 61(4), pages 1553-1604, 08.
  3. van Rooij, Maarten & Lusardi, Annamaria & Alessie, Rob J. M., 2007. "Financial literacy and stock market participation," CFS Working Paper Series 2007/27, Center for Financial Studies (CFS).
  4. Justine S. Hastings & Lydia Tejeda-Ashton, 2008. "Financial Literacy, Information, and Demand Elasticity: Survey and Experimental Evidence from Mexico," NBER Working Papers 14538, National Bureau of Economic Research, Inc.
  5. 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.
  6. 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.
  7. Justine Hastings & Olivia S. Mitchell, 2010. "How Financial Literacy and Impatience Shape Retirement Wealth and Investment Behaviors," Working Papers, University of Michigan, Michigan Retirement Research Center wp233, University of Michigan, Michigan Retirement Research Center.
  8. 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).
  9. Christelis, Dimitris & Jappelli, Tullio & Padula, Mario, 2010. "Cognitive abilities and portfolio choice," European Economic Review, Elsevier, Elsevier, vol. 54(1), pages 18-38, January.
  10. Doriana Ruffino, 2012. "Resuscitating Businessman Risk: A Rationale for Familiarity-Based Portfolios," Carlo Alberto Notebooks, Collegio Carlo Alberto 252, Collegio Carlo Alberto.
  11. James J Choi & David Laibson & Brigitte C Madrian, 2008. "Why Does the Law of One Price Fail? An Experiment on Index Mutual Funds," Levine's Working Paper Archive 122247000000002014, David K. Levine.
  12. Lusardi, Annamaria & Tufano, Peter, 2009. "Debt literacy, financial experiences, and overindebtedness," CFS Working Paper Series 2009/08, Center for Financial Studies (CFS).
  13. Annamaria Lusardi & Olivia S. Mitchell, 2006. "Baby Boomer Retirement Security: The Roles of Planning, Financial Literacy, and Housing Wealth," CeRP Working Papers 54, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  14. Annamaria Lusardi & Olivia S. Mitchell, 2011. "Financial Literacy and Retirement Planning in the United States," CeRP Working Papers 107, Center for Research on Pensions and Welfare Policies, Turin (Italy).
  15. Annamaria Lusardi, 2011. "Americans' Financial Capability," NBER Working Papers 17103, National Bureau of Economic Research, Inc.
  16. Annamaria Lusardi & Peter Tufano, 2009. "Debt Literacy, Financial Experiences, and Overindebtedness," NBER Working Papers 14808, National Bureau of Economic Research, Inc.
  17. 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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Cited by:
  1. 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.
  2. Annamaria Lusardi & Olivia S. Mitchell, 2013. "The Economic Importance of Financial Literacy: Theory and Evidence," CeRP Working Papers 134, Center for Research on Pensions and Welfare Policies, Turin (Italy).

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