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How Ordinary Consumers Make Complex Economic Decisions: Financial Literacy and Retirement Readiness

Author

Listed:
  • Annamaria Lusardi

    (The George Washington University School of Business, Duquès Hall, Suite 450E, Washington, DC 20052, USA)

  • Olivia S. Mitchell

    (The Wharton School, Univ. of Pennsylvania, 3620 Locust Walk, St. 3000 SH-DH, Philadelphia, PA 19104, USA)

Abstract

This paper explores who is financially literate, whether people accurately perceive their own economic decision-making skills, and where these skills come from. Self-assessed and objective measures of financial literacy can be linked to consumers’ efforts to plan for retirement in the American Life Panel, and causal relationships with retirement planning examined by exploiting information about respondent financial knowledge acquired in school. Results show that those with more advanced financial knowledge are those more likely to be retirement-ready.

Suggested Citation

  • Annamaria Lusardi & Olivia S. Mitchell, 2017. "How Ordinary Consumers Make Complex Economic Decisions: Financial Literacy and Retirement Readiness," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 7(03), pages 1-31, September.
    • Handle: RePEc:wsi:qjfxxx:v:07:y:2017:i:03:n:s2010139217500082
    DOI: 10.1142/S2010139217500082
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    References listed on IDEAS

    as
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    18. van Rooij, Maarten & Lusardi, Annamaria & Alessie, Rob, 2011. "Financial literacy and stock market participation," Journal of Financial Economics, Elsevier, vol. 101(2), pages 449-472, August.
    19. Annamarie Lusardi & Olivia S. Mitchell, 2005. "Financial Literacy and Planning: Implications for Retirement Wellbeing," Working Papers wp108, University of Michigan, Michigan Retirement Research Center.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Financial knowledge; financial sophistication; retirement planning;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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