IDEAS home Printed from https://ideas.repec.org/p/cca/wpaper/289.html

Housing wealth decumulation, portfolio composition and financial literacy among the European elderly

Author

Listed:
  • Agnese Romiti
  • Mariacristina Rossi

Abstract

This paper analyses the role played by financial literacy in savings decisions and wealth decumulation. The broad evidence shows that (elderly) households do not decumulate their assets as they age, contradicting the standard life-cycle theory, which predicts that households should decumulate their assets in order to keep their consumption smooth. In particular, older people seem to be very attached to illiquid assets, such as housing wealth, which is far more difficult to liquidate and use to face unexpected shocks and to smooth consumption. Using the SHARE (Survey of Health, Ageing, and Retirement in Europe) survey, we try to detect whether more financial literacy brings about more optimal behaviour from a life-cycle perspective, and we look at the impact of financial literacy on three different dimensions of savings decisions: an unbalanced portfolio with excessive weight assigned to illiquid assets, the optimal consumption path, and housing wealth decumulation. According to our findings, financial literacy substantially reduces the portfolio imbalance of people aged 50+ by reducing the weight of housing wealth over total net worth; at the same time, it is responsible for a more optimal consumption path and for housing wealth decumulation.

Suggested Citation

  • Agnese Romiti & Mariacristina Rossi, 2012. "Housing wealth decumulation, portfolio composition and financial literacy among the European elderly," Carlo Alberto Notebooks 289, Collegio Carlo Alberto.
    • Handle: RePEc:cca:wpaper:289
    as

    Download full text from publisher

    File URL: https://www.carloalberto.org/wp-content/uploads/2018/11/no.289.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Maarten C.J. van Rooij & Annamaria Lusardi & Rob J.M. Alessie, 2012. "Financial Literacy, Retirement Planning and Household Wealth," Economic Journal, Royal Economic Society, vol. 122(560), pages 449-478, May.
    2. repec:ecj:econjl:v:122:y:2012:i::p:449-478 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. The elderly are not decumulating their wealth fast enough
      by Economic Logician in Economic Logic on 2013-05-02 19:11:00

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Edyta Marcinkiewicz & Filip Chybalski, 2022. "Income-Poor, Asset-Rich? The Role of Homeownership in Shaping the Welfare Position of the Elderly," LWS Working papers 38, LIS Cross-National Data Center in Luxembourg.
    2. Sara Lamboglia & Massimiliano Stacchini, 2025. "On the drivers of financial literacy: the role of intergenerational mobility," Empirical Economics, Springer, vol. 68(2), pages 667-695, February.
    3. Mariacristina Rossi & Dario Sansone, 2018. "Precautionary savings and the self-employed," Small Business Economics, Springer, vol. 51(1), pages 105-127, June.
    4. Dillingh, Rik & Prast, Henriette & Rossi, Mariacristina & Urzì Brancati, Cesira, 2017. "Who wants to have their home and eat it too? Interest in reverse mortgages in the Netherlands," Journal of Housing Economics, Elsevier, vol. 38(C), pages 25-37.
    5. Sara Lamboglia & Fabio Travaglino, 2022. "Statistical sources for assessing financial literacy," Questioni di Economia e Finanza (Occasional Papers) 725, Bank of Italy, Economic Research and International Relations Area.
    6. Dillingh, Rik, 2016. "Empirical essays on behavioral economics and lifecycle decisions," Other publications TiSEM 0e2143e3-bd86-4302-90eb-e, Tilburg University, School of Economics and Management.
    7. Sara Lamboglia & Massimiliano Stacchini, 2025. "Financial Literacy, Numeracy, and Schooling: Evidence from Developed Countries," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 11(2), pages 547-569, July.
    8. Arts, Jori & Ponds, Eduard, 2016. "The Need for Flexible Take-ups of Home Equity and Pension Wealth in Retirement," Other publications TiSEM 4331ef5b-798f-48dd-8bb5-a, Tilburg University, School of Economics and Management.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Marcela Ibanez & Sebastian O. Schneider, 2023. "Income Risk, Precautionary Saving, and Loss Aversion – An Empirical Test," Discussion Paper Series of the Max Planck Institute for Behavioral Economics 2023_06, Max Planck Institute for Behavioral Economics.
    2. Lee, Boram & Rosenthal, Leonard & Veld, Chris & Veld-Merkoulova, Yulia, 2015. "Stock market expectations and risk aversion of individual investors," International Review of Financial Analysis, Elsevier, vol. 40(C), pages 122-131.
    3. Matthew Fisher & Milica Mormann, 2022. "The Off by 100% Bias: The Effects of Percentage Changes Greater than 100% on Magnitude Judgments and Consumer Choice [Numerosity and Consumer Behavior]," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 49(4), pages 561-573.
    4. Bannier, Christina E. & Neubert, Milena, 2016. "Gender differences in financial risk taking: The role of financial literacy and risk tolerance," Economics Letters, Elsevier, vol. 145(C), pages 130-135.
    5. Kamer Karakurum-Ozdemir & Melike Kokkizil & Gokce Uysal, 2019. "Financial Literacy in Developing Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 143(1), pages 325-353, May.
    6. Marianne Laurin & Derek Messacar & Pierre-Carl Michaud, 2021. "Financial Literacy and the Timing of Tax-Preferred Savings Account Withdrawals," CIRANO Working Papers 2021s-36, CIRANO.
    7. Grohmann, Antonia & Klühs, Theres & Menkhoff, Lukas, 2018. "Does financial literacy improve financial inclusion? Cross country evidence," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 111, pages 84-96.
    8. Shubhra Biswas & Arindam Gupta, 2021. "Impact of Financial Literacy on Household Decision-Making: A Study in the State of West Bengal in India," International Journal of Economics and Financial Issues, Econjournals, vol. 11(5), pages 104-113.
    9. Kaiser, Tim & Menkhoff, Lukas, 2018. "Active Learning Improves Financial Education:," Rationality and Competition Discussion Paper Series 131, CRC TRR 190 Rationality and Competition.
    10. Florian Deuflhard & Dimitris Georgarakos & Roman Inderst, 2019. "Financial Literacy and Savings Account Returns," Journal of the European Economic Association, European Economic Association, vol. 17(1), pages 131-164.
    11. Lanciano, Edoardo & Previati, Daniele & Ricci, Ornella & Santilli, Gianluca, 2025. "Financial literacy and sustainable finance decisions among Italian households," Journal of Economics and Business, Elsevier, vol. 134.
    12. Anoosheh Rostamkalaei & Allan Riding, 2020. "Immigrants, Financial Knowledge, and Financial Behavior," Journal of Consumer Affairs, Wiley Blackwell, vol. 54(3), pages 951-977, September.
    13. Karen C. Castro-González, 2014. "Financial Literacy And Retirement Planning: Evidence From Puerto Rico," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 8(1), pages 87-98.
    14. Giofré, Maela, 2017. "Financial education, investor protection and international portfolio diversification," Journal of International Money and Finance, Elsevier, vol. 71(C), pages 111-139.
    15. Cupák, Andrej & Fessler, Pirmin & Hsu, Joanne W. & Paradowski, Piotr R., 2022. "Investor confidence and high financial literacy jointly shape investments in risky assets," Economic Modelling, Elsevier, vol. 116(C).
    16. Delis, Manthos & Galariotis, Emilios & Monne, Jerome, 2021. "Economic condition and financial cognition," Journal of Banking & Finance, Elsevier, vol. 123(C).
    17. Wang, Qian & Wang, Jun & Gao, Feng, 2021. "Who is more important, parents or children? Economic and environmental factors and health insurance purchase," The North American Journal of Economics and Finance, Elsevier, vol. 58(C).
    18. Marco Angrisani & Sergio Barrera & Luisa R. Blanco & Salvador Contreras, 2021. "The racial/ethnic gap in financial literacy in the population and by income," Contemporary Economic Policy, Western Economic Association International, vol. 39(3), pages 524-536, July.
    19. Ye, Zihan & Post, Thomas & Zou, Xiaopeng & Chen, Shenglan, 2025. "Savings goals matter–Cognitive constraints, retirement planning, and downstream economic behaviors," Journal of Behavioral and Experimental Finance, Elsevier, vol. 46(C).
    20. Ciril Bosch-Rosa & Brice Corgnet, 2022. "Cognitive finance," Chapters, in: Sascha Füllbrunn & Ernan Haruvy (ed.), Handbook of Experimental Finance, chapter 7, pages 73-88, Edward Elgar Publishing.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cca:wpaper:289. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Giovanni Bert (email available below). General contact details of provider: https://edirc.repec.org/data/fccaait.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.