Thursday, September 24, 2009

Financial Literacy and Retirement Readiness

Those working on ageing as well as literacy may be interested to see how financial literacy affects the retirement decision.

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

Annamaria Lusardi, Olivia S. Mitchell

This paper reports on several self-assessed and objective measures of financial literacy newly added to the American Life Panel (ALP), and it links these performance measures to efforts consumers make to plan for retirement. We evaluate the causal relationship between financial literacy and retirement planning by exploiting information about respondents’ financial knowledge acquired in school - before entering the labor market and certainly before starting to plan for retirement. Results show that those with more advanced financial knowledge are those more likely to be retirement-ready.

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