When Cognitive Functioning Meets Financial Literacy and Judgment in Older Age: Advising Those Self-Managing Retirement Savings
37 Pages Posted: 9 Feb 2015
Date Written: February 9, 2015
We investigate the relationships between measures of financial literacy, applied financial literacy, financial judgment and measures of fluid and crystallised cognitive ability. Given an ageing population and the responsibility for managing savings in retirement, this relationship is of increasing importance. We find differences between those people who self-manage large retirement savings portfolios and those with money in institutional retirement savings funds, with the former displaying greater financial literacy and judgment than is generally observed in members of institutional funds. We determine that different cognitive processes underlie financial literacy and financial judgment, and that these are susceptible to decline at different rates. Findings have important implications for the monitoring of cognitive ability, financial literacy and financial judgment over time.
Keywords: Retirement savings, cognitive ability, financial literacy, financial decision-making, dementia, ageing
JEL Classification: J26, D14, G23, G11, E21, I10
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