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Retirement Research: Financial Literacy and Financial Decision-Making at Older Ages

Financial literacy is associated with a greater propensity to timely pay off credit card balances, to hold stock, and to follow an age-appropriate investment glide path.

Financial Literacy and Financial Decision-Making at Older Ages

Abstract: How well older households manage their wealth holdings is an important determinant of their financial security during retirement, yet little is known about their financial decision-making and how this relates to their financial literacy.

This paper fills this gap by measuring financial literacy among older persons in the Singapore Life Panel and examining its association with timely credit card debt repayment, stock market participation, and age-based investment risk diversification. Most older respondents understand interest compounding and inflation, but fewer than half know about risk diversification. Almost all older credit card holders pay off their balances in a timely manner, but only 40% hold stocks; fewer than 18% with $1,000+ in assets hold portfolios consistent with age-appropriate investment glide paths. 

We further show that a one-unit higher financial literacy score is associated with a greater propensity to timely pay off credit card balances (1.5 ppts), to hold stock (8.3 ppts), and to follow an age-appropriate investment glide path (1.7 ppts). Financial Literacy and Financial Decision-Making at Older Ages

Survival Pessimism and the Demand for Annuities

Abstract: The "annuity puzzle" refers to the fact that annuities are rarely purchased despite the longevity insurance they provide. Most explanations for this puzzle assume that individuals have accurate expectations about their future survival. We provide evidence that individuals misperceive their mortality risk, and study the demand for annuities in a setting where annuities are priced by insurers on the basis of objectively-measured survival probabilities but in which individuals make purchasing decisions based on their own subjective survival probabilities. Subjective expectations have the capacity to explain significant rates of non-annuitization, yielding a quantitatively important explanation for the annuity puzzle. Survival Pessimism and the Demand for Annuities

How Much to Save? Decision Costs and Retirement Plan Participation
Abstract: Deciding how much to save for retirement can be complicated. Drawing on a field experiment conducted with the Department of Defense, we study whether such complexity depresses participation in an employer-sponsored retirement saving plan. We find that simplifying one dimension of the enrollment decision, by highlighting a potential rate at which non-participants might contribute, increases participation in the plan. Similar communications that did not include a highlighted rate yield smaller effects. The results highlight how reducing complexity on the intensive margin of a decision (how much to contribute) can affect extensive margin behavior (whether to contribute at all) in a setting of policy interest. How Much to Save? Decision Costs and Retirement Plan Participation

Fine Particulate Matter and Dementia in the Adult Changes in Thought Study

Workforce Aging, Pension Reforms, and Firm Outcomes

Re-examining Female Labor Supply Responses to the 1994 Australian Pension Reform

The Unequal Burden of Retirement Reform: Evidence from Australia

Financial Literacy and Financial Decision-Making at Older Ages

Abstract: How well older households manage their wealth holdings is an important determinant of their financial security during retirement, yet little is known about their financial decision-making and how this relates to their financial literacy.

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