When Cognitive Functioning Meets Financial Literacy and Judgment in Older Age: Advising Those Self-Managing Retirement Savings

37 Pages Posted: 9 Feb 2015

See all articles by Joanne Earl

Joanne Earl

University of New South Wales (UNSW) - School of Psychology

Paul Gerrans

The University of Western Australia - UWA Business School

Anthony Asher

University of New South Wales (UNSW) - School of Actuarial Studies

Date Written: February 9, 2015

Abstract

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

Suggested Citation

Earl, Joanne and Gerrans, Paul and Asher, Anthony, When Cognitive Functioning Meets Financial Literacy and Judgment in Older Age: Advising Those Self-Managing Retirement Savings (February 9, 2015). Available at SSRN: https://ssrn.com/abstract=2562239 or http://dx.doi.org/10.2139/ssrn.2562239

Joanne Earl (Contact Author)

University of New South Wales (UNSW) - School of Psychology ( email )

Sydney, NSW 2052
Australia

HOME PAGE: http://www.psy.unsw.edu.au/contacts-people/academic-staff/dr-joanne-jo-earl

Paul Gerrans

The University of Western Australia - UWA Business School ( email )

Crawley, Western Australia 6009
Australia
61 8 64882910 (Phone)

Anthony Asher

University of New South Wales (UNSW) - School of Actuarial Studies ( email )

Sydney, NSW 2052
Australia
612 9385 7619 (Phone)

HOME PAGE: http://www.asb.unsw.edu.au/schools/Pages/AnthonyAsher.aspx

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