@article {MITCHELL2022100371, title = {Income trajectories in later life: Longitudinal evidence from the Health and Retirement Study}, journal = {The Journal of the Economics of Ageing}, volume = {22}, year = {2022}, pages = {100371}, abstract = {We track low-income respondents in the longitudinal Health and Retirement Study for 23 years, to observe how their financial situations unfolded as they aged. We document that (a) real incomes remained relatively stable as individuals entered retirement and progressed through their later years; and (b) labor force participation declined and thus earnings became less important with age, while Social Security and retirement savings rose as a proportion of annual income. Low-income people near retirement also tended to fare poorly during retirement.}, keywords = {Aging, Financial literacy, Financial resilience, Vulnerable groups}, issn = {2212-828X}, doi = {10.1016/j.jeoa.2022.100371}, author = {Olivia S. Mitchell and Robert L. Clark and Annamaria Lusardi} } @article {11588, title = {What Explains Low Old-Age Income? Evidence from the Health and Retirement Study}, number = {28721}, year = {2021}, institution = {National Bureau of Economic Research}, address = {Cambridge, MA}, abstract = {We examine respondents in the Health and Retirement Study (HRS) to observe how their financial situations unfolded as they aged. We focus on low income older adults and follow them over time to identify the factors associated with having low income at baseline and thereafter. We find that (a) real income remained relatively stable as individuals approach and enter retirement, and progress through their retirement years, and (b) labor force participation declined and thus earnings became less important with age, while Social Security and retirement savings rose as a proportion of annual income.}, keywords = {Income, retirement savings, Social Security}, doi = {10.3386/w28721}, author = {Olivia S. Mitchell and Clark, Robert L. and Annamaria Lusardi} } @article {10727, title = {Debt and Financial Vulnerability on the Verge of Retirement}, journal = {Journal of Money, Credit and Banking}, volume = {52}, year = {2020}, pages = {1005-1034}, type = {Journal}, abstract = {Abstract We analyze older individuals{\textquoteright} debt and financial vulnerability using data from the Health and Retirement Study (HRS) and the National Financial Capability Study (NFCS). In the HRS, we compare three groups of people age 56{\textendash}61 in 1992, 2004, and 2010, to assess cross-cohort changes in debt over time. Two waves of the NFCS (2012 and 2015) provide additional insights into debt management and older individuals{\textquoteright} capacity to shield themselves against shocks. We conclude that recent cohorts hold more debt and face more financial insecurity than in the past. This will render them particularly vulnerable to forecasted interest rate increases.}, keywords = {Personal finance, retirement plans}, issn = {00222879}, doi = {10.1111/jmcb.12671}, author = {Annamaria Lusardi and Olivia S. Mitchell and Oggero, Noemi} } @article { ISI:000535914600014, title = {Financial Fraud Among Older Americans: Evidence and Implications}, journal = {JOURNALS OF GERONTOLOGY SERIES B-PSYCHOLOGICAL SCIENCES AND SOCIAL SCIENCES}, volume = {75}, year = {2020}, pages = {861-868}, abstract = {Objectives: The consequences of poor financial capability at older ages are serious and include making mistakes with credit, spending retirement assets too quickly, and being defrauded by financial predators. Because older persons are at or past the peak of their wealth accumulation, they are often the targets of fraud. Methods: Our project analyzes a module we developed and fielded on people aged 50 an older years in the 2016 Health and Retirement Study (HRS). Using this data set, we evaluated the incidence and prospective risk factors (measured in 2010) for investment fraud and prize/lottery fraud using logistic regression (N = 1,220). Results: Relatively few HRS respondents mentioned any single form of fraud over the prior 5 years, but 5.0\% reported at least one form of investment fraud and 4.4\% recounted prize/lottery fraud. Greater wealth (nonhousing) was associated with investment fraud, whereas lower housing wealth and symptoms of depression were associated with prize/lottery fraud. Hispanics were significantly less likely to report either type of fraud. Other suspected risk factors-low social integration and financial literacy-were not significant. Discussion: Fraud is a complex phenomenon and no single factor uniquely predicts victimization across different types, even within the category of investment fraud. Prevention programs should educate consumers about various types of fraud and increase awareness among financial services professionals.}, keywords = {Financial literacy, Health and Retirement Study, Investment fraud, Lottery scam}, issn = {1079-5014}, doi = {10.1093/geronb/gby151}, author = {DeLiema, Marguerite and Deevy, Martha and Annamaria Lusardi and Olivia S. Mitchell} } @article {10730, title = {Understanding Debt in the Older Population}, number = {WP2020-04}, year = {2020}, institution = {University of Pennsylvania}, type = {Report}, address = {Philadelphia}, abstract = {Poor financial capability can have important consequences for well-being in later life. To explore aspects of financial management related to debt, we have designed and analyzed a new module in the 2018 Health and Retirement Study along with information from the 2018 National Financial Capability Study to evaluate the factors associated with debt and debt management in later life. We show that, even for older Americans, student loans and unpaid medical bills represent a large proportion of their debt, and having children also contributes to their indebtedness. By contrast, the more financially literate have more positive financial perceptions and behaviors. Specifically, being able to answer one additional financial literacy question correctly is associated with a higher probability (3-6 percentage points) of reporting an above average credit record and planning for retirement. Clearly, financial knowledge can help limit debt exposure at older ages.}, keywords = {Debt, financial fragility, Financial literacy, Mortgages, Retirement, student loans}, url = {https://repository.upenn.edu/prc_papers/575/}, author = {Annamaria Lusardi and Olivia S. Mitchell and Oggero, Noemi} } @article {9600, title = {The Changing Face of Debt and Financial Fragility at Older Ages}, journal = {AEA Papers and Proceedings}, volume = {108}, year = {2018}, month = {05/2018}, pages = {4077-411}, chapter = {407}, abstract = {We investigate changes in older individuals{\textquoteright} financial fragility as they stand on the verge of retirement. Using data from the Health and Retirement Study (HRS), we compare how debt has changed for successive cohorts of people age 56-61. Our analysis shows that recent older Americans close to retirement hold more debt, and hence face greater financial insecurity, than earlier generations. This is primarily due to having bought more expensive homes with smaller down payments. We discuss possible policy implications. }, keywords = {Debt, Finances, Financial security, Homeownership, Retirement Planning and Satisfaction}, issn = {2574-0768}, author = {Annamaria Lusardi and Olivia S. Mitchell and Oggero, Noemi} } @article {9493, title = {Exploring the Risks and Consequences of Elder Fraud Victimization: Evidence from the Health and Retirement Study}, number = {WP397}, year = {2018}, month = {12/2017}, institution = {Michigan Retirement Research Center, Institute for Social Research, University of Michigan}, address = {Ann Arbor, MI}, abstract = {This is the first study to use longitudinal data to explore both the antecedents and consequences of fraud victimization in the older population. Because older persons are close to or past the peak of their wealth accumulation, they are often the targets of fraud. This paper reports on analysis of the Leave Behind Questionnaires (LBQs) fielded on Health and Retirement Study (HRS) respondents over three survey waves in 2008, 2010, and 2012. We evaluate the demographic determinants and risk factors of reporting financial fraud victimization in the survey, and explore whether there are demographic subgroups of older victims. In addition, we examine the financial, physical and psychological consequences of fraud. Overall results suggest that there is no single reliable predictor of fraud victimization across all three LBQ samples. When LBQ responses were pooled across survey years, we found that younger, male, better-educated, and depressed persons reported being defrauded significantly more often. Victimization was associated with lower nonhousing wealth in the combined sample controlling for other factors, but had no measurable impact on cognitive, psychological, or physical health outcomes. Future research should examine predictors and outcomes based on the type of financial fraud experienced and the amount of money lost.}, keywords = {Crime, Elder fraud, Gender Differences, Risk Factors}, url = {http://mrrc.isr.umich.edu/wp374/}, author = {DeLiema, Marguerite and Deevy, Martha and Annamaria Lusardi and Olivia S. Mitchell} } @article {9791, title = {Financial Fraud among Older Americans: Evidence and Implications}, number = {NBER Working Paper No. 24803}, year = {2018}, institution = {National Bureau of Economic Research}, address = {Cambridge, MA}, abstract = {The consequences of poor financial capability at older ages are serious and include making mistakes with credit, spending retirement assets too quickly, and being defrauded by financial predators. Because older persons are at or past the peak of their wealth accumulation, they are often the targets of fraud. Our project analyzes a module we developed and fielded in the 2016 Health and Retirement Study (HRS). Using this dataset, we evaluate the incidence and risk factors for investment fraud, prize/lottery scams, and account misuse, using regression analysis. Relatively few HRS respondents mentioned any single form of fraud over the prior five years, but nearly 5\% reported at least one form of investment fraud, 4 \% recounted prize/lottery fraud, and 30\% indicated that others had used/attempted to use their accounts without permission. There were few risk factors consistently associated with such victimization in the older population. Fraud is a complex phenomenon and no single factor uniquely predicts victimization. The incidence of fraud could be reduced by educating consumers about various types of fraud and by increasing awareness among financial service professionals.}, keywords = {Finances, Fraud, Risk Factors}, doi = {10.3386/w24803}, url = {http://www.nber.org/papers/w24803.pdf}, author = {DeLiema, Marguerite and Deevy, Martha and Annamaria Lusardi and Olivia S. Mitchell} } @article {9259, title = {Debt and Financial Vulnerability on the Verge of Retirement}, number = {Working Paper No. 23664}, year = {2017}, institution = {National Bureau of Economic Research}, address = {Cambridge, MA}, abstract = {We analyze older individuals{\textquoteright} debt and financial vulnerability using data from the Health and Retirement Study (HRS) and the National Financial Capability Study (NFCS). Specifically, in the HRS we examine three different cohorts (individuals age 56-61) in 1992, 2004, and 2010 to evaluate cross-cohort changes in debt over time. We also use two waves of the NFCS (2012 and 2015) to gain additional insights into debt management and older individuals{\textquoteright} capacity to shield themselves against shocks. We show that recent cohorts have taken on more debt and face more financial insecurity, mostly due to having purchased more expensive homes with smaller down payments.}, keywords = {Consumption and Savings, Debt, Retirement Planning and Satisfaction}, doi = {10.3386/w23664}, url = {http://www.nber.org/papers/w23664.pdf}, author = {Annamaria Lusardi and Olivia S. Mitchell and Oggero, Noemi} } @article {9165, title = {Optimal financial knowledge and wealth inequality}, journal = {The Journal of Political Economy}, volume = {125}, year = {2017}, pages = {431-477}, abstract = {We show that financial knowledge is a key determinant of wealth inequality in a stochastic lifecycle model with endogenous financial knowledge accumulation, where financial knowledge enables individuals to better allocate lifetime resources in a world of uncertainty and imperfect insurance. Moreover, because of how the U.S. social insurance system works, better-educated individuals have most to gain from investing in financial knowledge. Our parsimonious specification generates substantial wealth inequality relative to a one-asset saving model and one where returns on wealth depend on portfolio composition alone. We estimate that 30-40 percent of retirement wealth inequality is accounted for by financial knowledge.}, keywords = {Financial literacy, Retirement Planning and Satisfaction, Wealth}, issn = {0022-3808}, doi = {10.1086/690950}, author = {Annamaria Lusardi and Pierre-Carl Michaud and Olivia S. Mitchell} } @article {8888, title = {Older Women{\textquoteright}s Labor Market Attachment, Retirement Planning, and Household Debt}, number = {Working Paper No. 22606}, year = {2016}, month = {09/2016}, pages = {1-38}, institution = {National Bureau of Economic Research}, address = {Cambridge, MA}, abstract = {The goal of this paper is to ascertain whether older women{\textquoteright}s current and anticipated future labor force patterns have changed over time, and if so, to evaluate the factors associated with longer work lives and plans to continue work at older ages. Using data from both the Health and Retirement Study (HRS) and the National Financial Capability Study (NFCS), we show that older women{\textquoteright}s current and intended future labor force attachment patterns are changing over time. Specifically, compared to our 1992 HRS baseline, more recent cohorts of women in their 50{\textquoteright}s and 60s{\textquoteright}s are more likely to plan to work longer. When we explore the reasons for delayed retirement among older women, factors include education, more marital disruption, and fewer children than prior cohorts. But household finances also play a key role, in that older women today have more debt than previously and are more financially fragile than in the past. The NFCS data show that factors associated with retirement planning include having more education and greater financial literacy. Those who report excessive amounts of debt and are financially fragile are the least financially literate, had more dependent children, and experienced income shocks. Thus shocks do play a role in older women{\textquoteright}s debt status, but it is not enough to have resources: people also need the capacity to manage those resources if they are to stay out of debt as they head into retirement.}, keywords = {Older Adults, Retirement Planning and Satisfaction, Women and Minorities}, doi = {10.3386/w22606}, url = {http://www.nber.org/papers/w22606.pdf}, author = {Annamaria Lusardi and Olivia S. Mitchell} } @article {8266, title = {Debt literacy, financial experiences, and overindebtedness}, journal = {Journal of Pension Economics and Finance}, volume = {14}, year = {2015}, pages = {332}, publisher = {14}, abstract = {We analyze a national sample of Americans with respect to their debt literacy, financial experiences, and their judgments about the extent of their indebtedness. Debt literacy is a component of broader financial understanding that measures knowledge about debt and self-assessed financial knowledge. Financial experiences are the participants{\textquoteright} reported experiences with traditional borrowing, alternative borrowing, and investing. Overindebtedness is a self-reported measure. Debt literacy is low, with only about one-third of the population grasping the basics of interest compounding. Even after controlling for demographics, we find a relationship between debt literacy and both financial experiences and debt loads. Individuals with lower levels of debt literacy tend to transact in high-cost manners, incurring higher fees and using high-cost borrowing. We provide a rough estimate of the national implications of debt ignorance on credit card costs by consumers. Less knowledgeable individuals also report that their debt loads are excessive or that they are unable to judge their debt position.}, keywords = {Healthcare, Methodology, Net Worth and Assets, Other}, author = {Annamaria Lusardi and Peter Tufano} } @article {8560, title = {Financial Literacy and Economic Outcomes: Evidence and Policy Implications.}, journal = {J Retire}, volume = {3}, year = {2015}, month = {2015 Summer}, pages = {107-114}, abstract = {

This paper reviews what we have learned over the past decade about financial literacy and its relationship to financial decision-making around the world. Using three questions, we have surveyed people in several countries to determine whether they have the fundamental knowledge of economics and finance needed to function as effective decision-makers. We find that levels of financial literacy are low not only in the United States. but also in many other countries including those with well-developed financial markets. Moreover, financial illiteracy is particularly acute for some demographic groups, especially women and the less-educated. These findings are important since financial literacy is linked to borrowing, saving, and spending patterns. We also offer new evidence on financial literacy among high school students drawing on the 2012 Programme for International Student Assessment implemented in 18 countries. Last, we discuss the implications of this research for policy.

}, issn = {2326-6899}, doi = {10.3905/jor.2015.3.1.107}, url = {http://www.iijournals.com/doi/10.3905/jor.2015.3.1.107}, author = {Olivia S. Mitchell and Annamaria Lusardi} } @article {8559, title = {The Economic Importance of Financial Literacy: Theory and Evidence {\textdagger}}, journal = {Journal of Economic Literature}, volume = {52}, year = {2014}, month = {Jan-03-2014}, pages = {5 - 44}, abstract = {This paper undertakes an assessment of a rapidly growing body of economic research on financial literacy. We start with an overview of theoretical research, which casts financial knowledge as a form of investment in human capital. Endogenizing financial knowledge has important implications for welfare, as well as policies intended to enhance levels of financial knowledge in the larger population. Next, we draw on recent surveys to establish how much (or how little) people know and identify the least financially savvy population subgroups. This is followed by an examination of the impact of financial literacy on economic decision making in the United States and elsewhere. While the literature is still young, conclusions may be drawn about the effects and consequences of financial illiteracy and what works to remedy these gaps. A final section offers thoughts on what remains to be learned if researchers are to better inform theoretical and empirical models as well as public policy.}, keywords = {Decision making, Financial literacy, Older Adults, Welfare}, issn = {0022-0515}, doi = {10.1257/jel.52.1.5}, url = {http://pubs.aeaweb.org/doi/abs/10.1257/jel.52.1.5}, author = {Annamaria Lusardi and Olivia S. Mitchell} } @article {7970, title = {Financial literacy and financial sophistication in the older population}, journal = {Journal of Pension Economics and Finance}, volume = {13}, year = {2014}, note = {Export Date: 21 April 2014 Source: Scopus Article in Press}, pages = {347-366}, publisher = {13}, abstract = {Using a special-purpose module implemented in the Health and Retirement Study, we evaluate financial sophistication in the American population over the age of 50. We combine several financial literacy questions into an overall index to highlight which questions best capture financial sophistication and examine the sensitivity of financial literacy responses to framing effects. Results show that many older respondents are not financially sophisticated: they fail to grasp essential aspects of risk diversification, asset valuation, portfolio choice, and investment fees. Subgroups with notable deficits include women, the least educated, non-Whites, and those age 75 . In view of the fact that retirees increasingly must take on responsibility for their own retirement security, such meager levels of knowledge have potentially serious and negative implications.}, keywords = {Demographics, Net Worth and Assets, Other, Retirement Planning and Satisfaction}, doi = {10.1017/S1474747214000031}, author = {Annamaria Lusardi and Olivia S. Mitchell and Vilsa Curto} } @inbook {5249, title = {Retirement Planning and Financial Literacy}, booktitle = {International Handbook on Ageing and Public Policy}, year = {2014}, pages = {474-490}, publisher = {Edward Elgar Publishing}, organization = {Edward Elgar Publishing}, address = {Northhampton, MA}, keywords = {Net Worth and Assets, Retirement Planning and Satisfaction}, author = {Annamaria Lusardi}, editor = {Harper, Sarah and Hamblin, Kate} } @article {5970, title = {Older Adult Debt and Financial Frailty}, year = {2013}, institution = {Ann Arbor, The University of Michigan}, abstract = {Of particular interest in the present economic environment is whether access to credit is changing peoples indebtedness over time, particularly as they approach retirement. This project analyzes older individuals debt, debt management practices, and financial fragility using data from the Health and Retirement Study (HRS) and the National Financial Capability Study (NFCS). Specifically, we examine three different cohorts (individuals age 56 61) in different time periods, 1992, 2002 and 2008, in the HRS to evaluate cross-cohort changes in debt over time. We also draw on recent data from the National Financial Capability Study (NFCS) which provides detailed information on how families manage their debt. Our goal is to assess how wealth and debt among older persons has evolved over time, along with the potential consequences for retirement security. We find that more recent cohorts have taken on more debt and face more financial insecurity, mostly due to having purchased more expensive homes with smaller down payments. In addition, Baby Boomers are more likely to have engaged in expensive borrowing practices. Factors associated with better debt outcomes include having higher income, more education, and greater financial literacy; those associated with financial fragility include having more children and experiencing unexpected large income declines. Thus, shocks do play a role in the accumulation of debt close to retirement. But it is not enough to have resources, people also need the capacity to manage those resources if they are to stay out of debt as they head into retirement.}, keywords = {Net Worth and Assets, Retirement Planning and Satisfaction}, url = {http://www.mrrc.isr.umich.edu/dl.cfm?pid=946andtype=102}, author = {Annamaria Lusardi and Olivia S. Mitchell} } @article {8642, title = {Optimal Financial Knowledge and Wealth Inequality}, number = {18669}, year = {2013}, pages = {1-49}, institution = {National Bureau of Economic Research}, address = {Cambridge, MA}, abstract = {While financial knowledge is strongly positively related to household wealth, there is also considerable cross-sectional variation in both financial knowledge and net asset levels. To explore these patterns, we develop a calibrated stochastic life cycle model featuring endogenous financial knowledge accumulation. The model generates substantial wealth inequality, over and above that of standard life cycle models; this is because higher earners typically have more hump-shaped labor income profiles and lower retirement benefits which, when interacted with precautionary saving motives, boost their need for private wealth accumulation and thus financial knowledge. Our simulations show that endogenous financial knowledge accumulation has the potential to account for a large proportion of wealth inequality. The fraction of the population which is rationally financially "ignorant" depends on the generosity of the retirement system and the level of means-tested benefits. Educational efforts to enhance financial savvy early in the life cycle so as to produce one percentage point excess return per year would be valued highly by people in all educational groups.}, keywords = {Financial literacy, Older Adults, Wealth Inequality, Women and Minorities}, doi = {10.3386/w18669}, url = {http://www.nber.org/papers/w18669.pdf}, author = {Annamaria Lusardi and Pierre-Carl Michaud and Olivia S. Mitchell} } @article {9880, title = {Financial Sophistication in the Older Population}, number = {17863}, year = {2012}, institution = {National Bureau of Economic Research}, address = {Cambridge, MA}, 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.}, keywords = {Financial literacy, Retirement Planning and Satisfaction}, doi = {10.3386/w17863}, author = {Annamaria Lusardi and Olivia S. Mitchell and Vilsa Curto} } @article {5926, title = {Financial Sophistication in the Older Population}, number = {17863}, year = {2012}, institution = {National Bureau of Economic Research }, address = {Cambridge, MA}, 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.}, keywords = {Consumption and Savings, Employment and Labor Force, Event History/Life Cycle, Net Worth and Assets, Other, Public Policy, Women and Minorities}, doi = {10.3386/w17863}, author = {Annamaria Lusardi and Olivia S. Mitchell and Vilsa Curto} } @inbook {8641, title = {The Outlook for Financial Literacy}, booktitle = {Financial Literacy: Implications for Retirement Security and the Financial Marketplace}, year = {2012}, publisher = {Oxford University Press}, organization = {Oxford University Press}, chapter = {1}, address = {Oxford, UK}, keywords = {Financial literacy, Forecasting, Future, Older Adults}, author = {Annamaria Lusardi and Olivia S. Mitchell} } @article {8557, title = {Financial literacy and retirement planning in the United States}, journal = {Journal of Pension Economics and Finance}, volume = {10}, year = {2011}, pages = {509 - 525}, abstract = {We examine financial literacy in the US using the new National Financial Capability Study, wherein we demonstrate that financial literacy is particularly low among the young, women, and the less-educated. Moreover, Hispanics and African-Americans score the least well on financial literacy concepts. Interestingly, all groups rate themselves as rather well-informed about financial matters, notwithstanding their actual performance on the key literacy questions. Finally, we show that people who score higher on the financial literacy questions are much more likely to plan for retirement, which is likely to leave them better positioned for old age. Our results will inform those seeking to target financial literacy programmes to those in most need.}, keywords = {Education, Financial literacy, Older Adults, Retirement Planning and Satisfaction}, issn = {1474-7472}, doi = {10.1017/S1474747211000448}, author = {Annamaria Lusardi and Olivia S. Mitchell} } @article {8558, title = {FINANCIAL LITERACY AROUND THE WORLD: AN OVERVIEW.}, journal = {J Pension Econ Financ}, volume = {10}, year = {2011}, month = {2011 Oct}, pages = {497-508}, abstract = {

In an increasingly risky and globalized marketplace, people must be able to make well-informed financial decisions. Yet new international research demonstrates that financial illiteracy is widespread when financial markets are well developed as in Germany, the Netherlands, Sweden, Japan, Italy, New Zealand, and the United States, or when they are changing rapidly as in Russia. Further, across these countries, we show that the older population believes itself well informed, even though it is actually less well informed than average. Other common patterns are also evident: women are less financially literate than men and are aware of this shortfall. More educated people are more informed, yet education is far from a perfect proxy for literacy. There are also ethnic/racial and regional differences: city-dwellers in Russia are better informed than their rural counterparts, while in the U.S., African Americans and Hispanics are relatively less financially literate than others. Moreover, the more financially knowledgeable are also those most likely to plan for retirement. In fact, answering one additional financial question correctly is associated with a 3-4 percentage point higher chance of planning for retirement in countries as diverse as Germany, the U.S., Japan, and Sweden; in the Netherlands, it boosts planning by 10 percentage points. Finally, using instrumental variables, we show that these estimates probably underestimate the effects of financial literacy on retirement planning. In sum, around the world, financial literacy is critical to retirement security.

}, issn = {1474-7472}, doi = {10.1017/S1474747211000448}, url = {http://www.journals.cambridge.org/abstract_S1474747211000448}, author = {Annamaria Lusardi and Olivia S. Mitchell} } @book {8649, title = {Financial Literacy: Implications for Retirement Security and the Financial Marketplace}, series = {Pension Research Council Series}, year = {2011}, publisher = {Oxford University Press}, organization = {Oxford University Press}, address = {Oxford, UK}, abstract = {As financial markets grow ever more complex and integrated, households must make increasingly sophisticated and all-too-often irreversible economic decisions. This is particularly evident in retirement decision-making. Traditional defined benefit pension schemes are being replaced with defined contribution pensions; employer and government judgment regarding how much to save and where to invest has been replaced by employees having to make these choices on their own (sometimes assisted by advisers); and retirees have become responsible for managing their own pension assets. This volume explores how financial literacy can enhance peoples{\textquoteright} ability to make informed economic choices. It proposes that financial literacy determines how well people make and execute saving, investing, borrowing, and planning decisions. It examines causality using controlled settings to disentangle whether financial literacy causes saving or vice versa, and demonstrates that financial education programs do indeed enhance financial decision-making and asset accumulation.}, keywords = {Economics, Financial literacy, Older Adults, Retirement Planning and Satisfaction}, isbn = {0-19-969681-9}, url = {https://pensionresearchcouncil.wharton.upenn.edu/publications/books/financial-literacy-implications-for-retirement-security-and-the-financial-marketplace/}, author = {Olivia S. Mitchell and Annamaria Lusardi} } @article {5751, title = {Financial Literacy and Financial Sophistication Among Older Americans}, number = {15469}, year = {2009}, institution = { The National Bureau of Economic Research}, address = {Cambridge, MA}, 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.}, keywords = {Consumption and Savings, Net Worth and Assets, Retirement Planning and Satisfaction}, doi = {10.3386/w15469}, author = {Annamaria Lusardi and Olivia S. Mitchell and Vilsa Curto} } @article {5707, title = {Planning and Financial Literacy: How do women fare?}, number = {13750}, year = {2008}, institution = {National Bureau of Economic Research}, address = {Cambridge, MA, }, abstract = {Many older US households have done little or no planning for retirement, and there is a substantial population that seems to undersave for retirement. Of particular concern is the relative position of older women, who are more vulnerable to old-age poverty due to their longer longevity. This paper uses data from a special module we devised on planning and financial literacy in the 2004 Health and Retirement Study. It shows that women display much lower levels of financial literacy than the older population as a whole. In addition, women who are less financially literate are also less likely to plan for retirement and be successful planners. These findings have important implications for policy and for programs aimed at fostering financial security at older ages.}, keywords = {Net Worth and Assets, Retirement Planning and Satisfaction, Women and Minorities}, doi = {10.3386/w13750}, author = {Annamaria Lusardi and Olivia S. Mitchell} } @article {7124, title = {Baby Boomer Retirement Security: The Roles of Planning, Financial Literacy, and Housing Wealth}, journal = {Journal of Monetary Economics}, volume = {54}, year = {2007}, note = {Revision of MRRC WP 2006-114}, pages = {205-224}, publisher = {54}, abstract = {Recent research on wealth and household finances seeks to blend neoclassical models with an understanding of real-world imperfections to answer questions about why some people save and others do not. This paper focuses on Baby Boomers standing on the verge of retirement, many of whom have saved little and will face financial insecurity in old age. The new 2004 wave of the Health and Retirement Study is invaluable for this first analysis of the financial situation of leading-edge Boomers, as it reports not only wealth levels but also information about respondents planning behaviors and economic literacy. We show that the distribution of net worth among Early Baby Boomers is quite skewed; those in the 75th percentile had over 10 times the net worth ( 400K) of households in the bottom 25th percentile ( 37K). There is substantial heterogeneity in wealth within this cohort: the median high-school dropout had less than 23K in total net worth, while the median college graduate had over 10 times as much. Many Black and Hispanic Boomer households hold miniscule levels of wealth. Further, many in this cohort have accumulated little wealth outside their homes: at the mean, one third of the early Boomers wealth is held in the form of home equity, and at the median the fraction is close to half. Since many members of this EBB cohort are reaching retirement with a substantial portion of its wealth in housing, they are particularly vulnerable to housing value shocks. By contrast, holders of stocks, IRAs, and business equity are concentrated in the top quartiles. Finally, we show that planning and economic literacy are important predictors of savings and investment success.}, keywords = {Housing, Net Worth and Assets}, doi = {https://doi.org/10.1016/j.jmoneco.2006.12.001}, author = {Annamaria Lusardi and Olivia S. Mitchell} } @inbook {5208, title = {Saving Between Cohorts: The Role of Planning}, booktitle = {Redefining Retirement: How Will Boomers Fare?}, year = {2007}, note = {ProCite field 6 : In ProCite field 8 : eds}, publisher = {Oxford University Press}, organization = {Oxford University Press}, address = {New York, NY}, abstract = {We compare the saving behavior of two cohorts: the Early Baby Boomers (EBB, age 51- 56 in 2004) and the HRS cohort (age 51-56 in 1992). We find that EBB have accumulated more wealth than the previous cohort but they benefited from a large increase in house prices, which lifted the wealth of many home-owners. In fact, there are many families among EBB, particularly those headed by respondents with low education, low income, and minorities, which have less wealth than the previous cohort. Lack of wealth can be traced to lack of retirement planning. Notwithstanding the many initiatives aimed at fostering planning in the 1990s, a large portion of EBB still do not plan for retirement even though most respondents are close to it. The effect of planning is remarkably similar between the two cohorts; those who do not plan accumulate much lower amounts of wealth from 20 to 45 percent depending on the location in the wealth distribution- than those who do plan. Thus, for both the EBB and the HRS cohort, lack of planning is tantamount to lack of saving irrespective of the many changes in the economy between 1992 and 2004.}, keywords = {adequacy, Baby Boomer, Education, Housing, Income, minorities, Retirement Planning, Saving}, url = {https://oxford.universitypressscholarship.com/view/10.1093/acprof:oso/9780199230778.001.0001/acprof-9780199230778-chapter-13}, author = {Annamaria Lusardi and Beeler, Jason}, editor = {Brigitte C. Madrian and Olivia S. Mitchell and Beth J Soldo} } @article {5644, title = {Financial Literacy and Retirement Preparedness: Evidence and Implications for Financial Education Programs}, year = {2006}, institution = {Michigan Retirement Research Center, University of Michigan}, address = {Ann Arbor, MI}, 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 computations, 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.}, keywords = {Net Worth and Assets, Retirement Planning and Satisfaction}, doi = {10.2145/20070104}, author = {Annamaria Lusardi and Olivia S. Mitchell} } @article {5630, title = {Financial Literacy and Planning: Implications for Retirement Well-Being}, year = {2005}, institution = {The University of Michigan, Michigan Retirement Research Center}, abstract = {Only a minority of American households feels confident about retirement saving adequacy, and little is known about why people fail to plan for retirement, and whether planning and information costs might affect retirement saving patterns. To better understand these issues, we devised and fielded a purpose-built module on planning and financial literacy for the 2004 Health and Retirement Study (HRS). This module measures how workers make their saving decisions, how they collect the information for making these decisions, and whether they possess the financial literacy needed to make these decisions. Our analysis shows that financial illiteracy is widespread among older Americans: only half of the age 50 respondents could correctly answer two simple questions regarding interest compounding and inflation, and only one-third correctly answered these two questions and a question about risk diversification. Women, minorities, and those without a college degree were particularly at risk of displaying low financial knowledge. We also evaluate whether people tried to figure out how much they need to save for retirement, whether they devised a plan, and whether they succeeded at the plan. In fact, these calculations prove to be difficult: fewer than one-third of our age 50 respondents ever tried to devise a retirement plan, and only two-thirds of those who tried actually claim to have succeeded. Overall, fewer than one-fifth of the respondents believed they engaged in successful retirement planning. We also find that financial knowledge and planning are clearly interrelated: those who displayed financial knowledge were more likely to plan and to succeed in their planning. Moreover, those who did plan were more likely to rely on formal methods such as retirement calculators, retirement seminars, and financial experts, and less likely to rely on family/relatives or co-workers.}, keywords = {Net Worth and Assets, Retirement Planning and Satisfaction}, author = {Annamaria Lusardi and Olivia S. Mitchell} } @inbook {5189, title = {Financial Education and Saving}, booktitle = {Pension Design and Structure: New Lessons from Behavioral Economics}, year = {2004}, note = {RDA 1998-002 ProCite field 6 : In ProCite field 8 : eds.}, publisher = {Oxford University Press}, organization = {Oxford University Press}, abstract = {In this paper, I examine the financial situation of older households. In addition, I examine whether employers{\textquoteright} initiatives to reduce planning costs via retirement seminars have an effect on workers{\textquoteright} saving. Using data from the Health and Retirement Study, I first show that many families arrive close to retirement with little or no wealth. Portfolios are also rather simple, and many families, particularly those with low education, hold little or no high-return assets. I further show that seminars foster saving. This is particularly the case for those with low education and those who save little. By offering financial education, both financial and total net worth increase sharply, particularly for families at the bottom of the wealth distribution and those with low education. Retirement seminars also increase total wealth (inclusive of pension and Social Security) for both high and low education families. Taken together, this evidence suggests that retirement seminars can foster wealth accumulation and bolster financial security in retirement.}, keywords = {Education, Net Worth and Assets, Retirement Planning and Satisfaction}, url = {https://www.dartmouth.edu/~alusardi/Papers/Financial_Education_2004.pdf}, author = {Annamaria Lusardi}, editor = {Olivia S. Mitchell and Utkus, S.} } @article {5562, title = {The Impact of Financial Education on Savings and Asset Allocation}, year = {2003}, note = {RDA 1998-002}, institution = {Michigan Retirement Research Center, Michigan Retirement Research Center}, abstract = {In this paper, I examine the financial situation of older households. In addition, I examine whether employers initiatives to reduce planning costs via retirement seminars have an effect on workers saving. Using data from the Health and Retirement Study, I first show that many families arrive close to retirement with little or no wealth. Portfolios are also rather simple, and many families, particularly those with low education, hold little or no high-return assets. I further show that seminars foster saving. This is particularly the case for those with low education and those who save little. By offering financial education, both financial and total net worth increase sharply, particularly for families at the bottom of the wealth distribution and those with low education. Retirement seminars also increase total wealth (inclusive of pension and Social Security) for both high and low education families. Taken together, this evidence suggests that retirement seminars can foster wealth accumulation and bolster financial security in retirement.}, keywords = {Education, Net Worth and Assets}, url = {http://www.mrrc.isr.umich.edu/content.cfm?section=researchandcontent=research_detailandpid=UM03-06}, author = {Annamaria Lusardi} } @article {5570, title = {Planning and Saving for Retirement}, year = {2003}, note = {RDA 1998-002}, institution = {Dartmouth College, Dept. of Economics}, abstract = {There are vast differences in wealth holdings, even among households in similar age groups. In addition, a large percentage of U.S. households arrive close to retirement with little or no wealth. While many explanations can be found to rationalize these facts, approximately thirty percent of households whose head is close to retirement have done little or no planning for retirement. Planning is shaped by the experience of other individuals: individuals learn to plan for retirement from older siblings. They also learn from the experience of old parents. In particular, unpleasant events, such as financial difficulties and health shocks at the end of life, provide incentives toward planning. In addition, planning affects wealth levels as well as portfolio choice. Individuals who plan are more likely to hold large amounts of wealth and to invest their wealth holdings in high return assets, such as stocks. Thus, planning plays an important role in explaining the saving behavior of many households.}, keywords = {Methodology, Net Worth and Assets, Retirement Planning and Satisfaction}, url = {https://www.dartmouth.edu/~alusardi/Papers/Lusardi_pdf.pdf}, author = {Annamaria Lusardi} } @inbook {5187, title = {Saving, Public Policy, and Late-Life Inequality}, booktitle = {Focus on Economic Outcomes in Later Life: Public Policy, Health, and Cummulative Advantage}, series = {Annual Review of Gerontology and Geriatrics}, volume = {22}, year = {2003}, note = {RDA 1998-006 (Lusardi) ProCite field 6 : Chapter 10 in ProCite field 8 : eds.}, pages = {207-238}, publisher = {Springer Publishing Company}, organization = {Springer Publishing Company}, chapter = {10}, address = {New York, NY}, keywords = {Consumption and Savings, Public Policy}, doi = {10.1891/0198-8794.22.1.207}, author = {Annamaria Lusardi and Jonathan S Skinner and Steven F Venti}, editor = {Crystal, Stephen and Dennis G. Shea} } @article {5486, title = {Explaining Why So Many Households Do Not Save}, year = {2002}, note = {RDA 1998-002}, institution = {Dartmouth College, Dept. of Economics}, abstract = {There are vast differences in wealth holdings, even among households in similar age groups. In addition, a large percentage of U.S. households arrive close to retirement with little or no wealth. While many explanations can be found to rationalize these facts, approximately thirty percent of households whose head is close to retirement have done little or no planning for retirement. Planning is shaped by the experience of other individuals: individuals learn to plan for retirement from older siblings. They also learn from the experience of old parents. In particular, unpleasant events, such as financial difficulties and health shocks at the end of life, provide incentives toward planning. In addition, planning affects wealth levels as well as portfolio choice. Individuals who plan are more likely to hold large amounts of wealth and to invest their wealth holdings in high return assets, such as stocks. Thus, planning plays an important role in explaining the saving behavior of many households.}, keywords = {Consumption and Savings, Retirement Planning and Satisfaction}, url = {http://www.bc.edu/crr}, author = {Annamaria Lusardi} } @article {5502, title = {Liquidity Constraints, Wealth Accumulation and Entrepreneurship}, year = {2002}, institution = {Chicago Business School}, abstract = {There exist many government programs in the U.S. aimed to foster entrepreneurship and, in particular, to relax credit restrictions new entrepreneurs may face. However, many leading empirical works have found that there exists a positive correlation between wealth and starting a business and argued that binding liquidity constraints prevent many household from becoming business owners. In this paper, we examine closely the relationship between weath accumulation and entrepreneurship. We argue that, if liquidity constraints are binding, the incremental effect of a dollar of wealth on the probability to start a business should decrease as welath increases. Using data from several surveys, we can reject the hypothesis that liquidity constraints are the cause of the observed wealth-business start-up correlation. We find that only a small group of extremely wealthy households (top 3 of the wealth distribution) drives the correlation between wealth and becoming a business owner. Additionally, we find that there is no correlation between initial wealth (and wealth changes) and the propensity to become a business owner among businesses that require high starting capital and among groups that are ex-ante more likely to be liquidity constrained, such as young, black, or female households. Furthermore, when using a more appropriate measure of liquidity and accessibility of funds, such as receiving insurance settlements or capital gains on home equity, we find that the positive correlation between wealth and starting a business vanishes. Finally, we examine the importance of family wealth in affecting the child{\textquoteright}s propensity to start a business as well as business survival. We again show that it is mainly those families at the very top of the wealth distribution that are responsible for driving the positive relationship between wealth and business start-up and wealth and business survival. Taken together, our evidence casts severe doubts that the mechanism at play in explaining the positive relationship between wealth and business start-up had much to do with the existence of liquidity constraints.}, keywords = {Employment and Labor Force, Net Worth and Assets}, doi = {10.1086/381478}, author = {Hurst, Erik and Annamaria Lusardi} } @article {6836, title = {Preparing for Retirement: The Importance of Planning Costs}, journal = {National Tax Association Proceedings}, year = {2002}, note = {RDA 1998-002}, pages = {148-154}, keywords = {Retirement Planning and Satisfaction}, url = {https://www.dartmouth.edu/~alusardi/Papers/Lusardi.pdf}, author = {Annamaria Lusardi} } @article {NBERw8237, title = {Saving Puzzles and Saving Policies in the United States}, year = {2001}, institution = {NBER}, abstract = {In the past two decades the widely reported personal saving rate in the United States has dropped from double digits to below zero. First, we attempt to account for the decline in the National Income and Product Accounts (NIPA) saving rate. The macroeconomic literature suggests that about half of the drop since 1988 can be attributed to households spending stock market capital gains. Another thirty percent is accounting transfers from personal saving into government and corporate saving because of the way pensions and capital gains taxes are treated in the NIPA. Second, while NIPA saving measures are well suited for measuring the supply of new funds for investment and capital accumulation, it is not clear that they should be the target of government saving policies. Finally, we emphasize that the NIPA saving rate is not useful in judging whether households are preparing for retirement or other contingencies. Many households have accumulated significant wealth, primarily through retirement saving vehicles and capital gains, even as the saving rate slid. There remains a segment of the population, however, who save little and whose behavior appears untouched either by the stock market boom or the slide in personal saving. We explore reasons and policy options for their puzzlingly low saving rate.}, keywords = {Saving, Saving behavior, Wealth, wealth accumulation}, doi = {10.3386/w8237}, url = {http://www.nber.org/papers/w8237}, author = {Annamaria Lusardi and Jonathan S Skinner and Steven F Venti} } @article {6778, title = {Savings of Young Parents}, journal = {The Journal of Human Resources}, volume = {36}, year = {2001}, pages = {762-794}, publisher = {36}, abstract = {In this paper, we examine household savings using data from the National Longitudinal Survey, Cohort 1997. This data set provides detailed information about assets and liabilities of parents with teenage children. In our empirical work, we have to first deal with several problems in measuring wealth. Although many responding parents report owning assets and liabilities, they often do not report their values. To get around the nonresponse problem, we impute the missing values for assets and liabilities. To study the patterns of accumulation of young parents, we examine wealth holdings and asset ownership across several demographic groups.}, keywords = {Consumption and Savings, Net Worth and Assets}, doi = {10.2307/3069641}, author = {Annamaria Lusardi and Cossa, Ricardo and Krupka, Erin L.} } @article {5418, title = {Precautionary Saving and the Accumulation of Wealth}, year = {2000}, note = {RDA 1998-002}, institution = {Dartmouth College}, abstract = {In this paper, I estimate the extent of precautionary accumulation using data from a new survey: the US Health and Retirement Study, which samples older households. I account for many determinants of wealth, not only past economic circumstances and expectations about future resources, but also individual preferences, such as risk aversion and impatience. In addition and most importantly, I account for risk using subjective data on the probability of job loss in the future. I find evidence in favor of precautionary saving. While the precautionary saving motive does not give rise to a lot of wealth, many households make provisions to insure against earnings risk. Thus, precautionary saving continues to affect accumulation even at late stages of the life cycle.}, keywords = {Consumption and Savings, Expectations, Net Worth and Assets}, url = {https://www.researchgate.net/publication/5091193_Precautionary_Saving_and_the_Accumulation_of_Wealth}, author = {Annamaria Lusardi} } @article {6713, title = {Saving for Retirement: The Importance of Planning}, journal = {TIAA-CREF Institute Research Dialogue}, volume = {66}, year = {2000}, note = {RDA 1998-002}, publisher = {66}, abstract = {In this article, I examine saving and planning behavior of households whose head is only a few years away from retirement using data from the Health and Retirement Study (HRS), a survey of a sample of U.S. households in which the head was born between 1931 and 1941. This survey reports detailed information on wealth and the retirement process, with a focus on health, participation in labor markets, and economic and psychosocial factors. These data provide the researcher with an unusually rich set of information to analyze household behavior. I also use data from the Survey of Consumer Finances (SCF), a triennial survey of U.S. families sponsored by the Board of Governors of the Federal Reserve System. This survey is designed to provide detailed information on families{\textquoteright} balance sheets and their use of financial services. Finally, in a few instances, data from the 1997 Retirement Confidence Survey are mentioned; this survey collected information on American workers{\textquoteright} retirement planning and saving behavior (Yakoboski and Dickemper, 1997).}, keywords = {Employment and Labor Force, Health Conditions and Status, Net Worth and Assets}, url = {https://www.tiaainstitute.org/sites/default/files/presentations/2017-02/66.pdf}, author = {Annamaria Lusardi} } @inbook {5124, title = {Information, Expectations, and Savings for Retirement}, booktitle = {Behavioral Dimensions of Retirement Economics}, year = {1999}, note = {RDA 1998-002ProCite field[3]: U ChicagoProCite field[8]: ed.}, pages = {81-115}, publisher = {Brookings Institution Press and Russell Sage Foundation}, organization = {Brookings Institution Press and Russell Sage Foundation}, address = {Washington, D.C.}, keywords = {Consumption and Savings, Event History/Life Cycle, Retirement Planning and Satisfaction}, author = {Annamaria Lusardi}, editor = {Aaron, Henry J.} } @article {6601, title = {On the Importance of the Precautionary Saving Motive}, journal = {American Economic Review}, volume = {88}, year = {1998}, note = {RDA 1998-002 ProCite field 3 : Dartmouth College}, pages = {449-53}, publisher = {88}, keywords = {Consumption and Savings, Event History/Life Cycle}, author = {Annamaria Lusardi} } @article {6563, title = {Household Saving: Micro Theories and Micro Facts}, journal = {Journal of Economic Literature}, volume = {34}, year = {1996}, pages = {1797-1855}, publisher = {34}, abstract = {In this article the main goal is to uncover what causes households to save currency in any form, liquid or not. The authors begin with the eight postulates on saving of John Maynard Keyenes and add a ninth reason to accumulate deposits to buy houses, cars, and other durables. From this they try to link facts about household saving with the microeconomic theories regarding household saving. Their over-arching assumption is that rational forward looking people will not want expenditure or the marginal utility of their expenditure to be greater at one time than at any other time. Various microeconomic saving theories are discussed and the authors make arguments toward what is realistic in the models and where the models deviate from the real world, as well as, how the models differ from one another. Statistical information from the HRS, AHEAD, RHS studies are used as facts that are explained by, or linked to, concepts of the various models. This data thus explains who saves, but not why. The theories described at the beginning of the paper and the statistical information presented are then used in a sort of case study on the declining savings rate over the two decades of the 1970s and 1980s. The conclusion is that the Standard Model of saving is the most flexible and helpful in understanding saving and consumption. The Certainty-Equivalence Model is very strong, but leaves out the important postulate of saving in order to have enough resources in the case of an unforeseen economic downturn or shock. It is the author s belief that the only alternatives to the standard model are behavioral models, but behavioral models may be harder to test. Attempting to link standard model predictions with behavioral models may enable economists to learn more about cross-section variation among ages with regard to savings.}, keywords = {Consumption and Savings, Methodology}, url = {https://www.jstor.org/stable/2729595?seq=1}, author = {Browning, Martin and Annamaria Lusardi} }