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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.
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Opinions and errors are solely those of the authors and not of the institutions with which the authors are affiliated. Copyright 2009 © Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.
This research is part of the NBER programs on Aging and Labor Economics and was undertaken pursuant to a grant from the US Social Security Administration (SSA) to the Michigan Retirement Research Center (MRRC). Additional support was provided by the Pension Research Council and Boettner Center at the Wharton School of the University of Pennsylvania, and the FINRA Investor Education Foundation.
Date Posted: 23 August 2019