Li, Yang (2018) Financial literacy and economic security in later life. Innovation in Aging, 2 (S1), 25. (doi:10.1093/geroni/igy023.091).
Abstract
As more adults approach retirement, the risk of economic insecurity post-retirement has garnered increasing attention. Financial literacy has been linked to greater economic security as it signals the knowledge and skills needed to manage financial resources. Yet, nearly half of American older adults possess inadequate financial literacy, which is linked to greater risk of making poor investment decisions, failing to maximize retirement benefits, and accumulating less wealth near retirement. Although targeted financial education has been advocated as a means to promote financial literacy, its effect is shown to be limited. Recent studies suggest that long-term exposure to financial experience (e.g. managing pension plans) is associated with higher financial literacy as it provides older adults with decision-making opportunities and the incentive to self-educate to improve financial literacy. I discuss the implication of these findings and additional policy options that may help older adults improve financial literacy and in turn economic security
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