Aging and Financial Decision Making
Management Science, 2015, 61(11), 2603-2610
23 Pages Posted: 22 Oct 2012 Last revised: 17 Nov 2015
Date Written: June 1, 2014
This study examines how cognitive changes associated with aging impact the financial decision making capability of older Americans. We find that a decrease in cognition is associated with a decrease in financial literacy. Decreases in episodic memory and visuospatial ability are associated with a decrease in numeracy, and a decrease in semantic memory is associated with a decrease in financial knowledge. A decrease in cognition also predicts a drop in self-confidence in general, but importantly, it is not associated with a drop in confidence in managing one's own finances. Participants experiencing decreases in cognition do show an increased likelihood of getting help with financial decisions; however, many participants experiencing significant drops in cognition still do not get help.
Keywords: aging, cognitive decline, financial literacy, retirement
JEL Classification: G00, H31
Suggested Citation: Suggested Citation