Financial Literacy and Financial Sophistication Among Older Americans
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.
The research reported herein was conducted pursuant to grants from the U.S. Social Security Administration (SSA) to the Financial Literacy Center and the Michigan Retirement Research Center funded via the Financial Literacy Research Center and the Retirement Research Consortium. Additional support was provided by the Pension Research Council and Boettner Center at the Wharton School of the University of Pennsylvania, and FINRA Investor Education Foundation. Opinions and errors are solely those of the authors and not of the institutions with which the authors are affiliated. © Lusardi, Mitchell, and Curto. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.