Income Trajectories in Later Life: Longitudinal Evidence from the Health and Retirement Study.

We track low-income respondents in the longitudinal Health and Retirement Study for 23 years, to observe how their financial situations unfolded as they aged. We document that (a) real incomes remained relatively stable as individuals entered retirement and progressed through their later years; and (b) labor force participation declined and thus earnings became less important with age, while Social Security and retirement savings rose as a proportion of annual income. Low-income people near retirement also tended to fare poorly during retirement.

Older Peoples' Willingness to Delay Social Security Claiming.

We have designed and implemented an experimental module in the 2014 Health and Retirement Study (HRS) to measure older persons' willingness to defer claiming of Social Security benefits. Under the current system' where delaying claiming boosts eventual benefits, we show that 46% of the respondents would delay claiming and work longer. If respondents were instead offered an actuarially fair payment instead of higher lifelong benefits, about 56% indicate they would delay claiming.

How Financial Literacy Shapes the Demand for Financial Advice at Older Ages.

We investigate how financial literacy shapes older Americans' demand for financial advice. Using an experimental module fielded in the Health and Retirement Study, we show that financial literacy strongly improves the but not the of financial advice sought. In particular, more financially literate people seek financial help from professionals.

How Financial Literacy and Impatience Shape Retirement Wealth and Investment Behaviors.

Two competing explanations for why consumers have trouble with financial decisions are gaining momentum. One is that people are financially illiterate since they lack understanding of simple economic concepts and cannot carry out computations such as computing compound interest, which could cause them to make suboptimal financial decisions. A second is that impatience or present-bias might explain suboptimal financial decisions.

Time Discounting and Economic Decision-making in the Older Population.

This paper examines heterogeneity in time discounting among a representative sample of elderly Americans, as well as its role in explaining key economic behaviors at older ages. We show how older Americans evaluate simple (hypothetical) inter-temporal choices in which payments today are compared with payments in the future. Using the indicators derived from this measure, we then demonstrate that differences in discounting patterns are associated with characteristics of particular importance in elderly populations.

Financial Fraud Among Older Americans: Evidence and Implications.

Objectives: The consequences of poor financial capability at older ages are serious and include making mistakes with credit, spending retirement assets too quickly, and being defrauded by financial predators. Because older persons are at or past the peak of their wealth accumulation, they are often the targets of fraud.

Methods: Our project analyzes a module we developed and fielded on people aged 50 an older years in the 2016 Health and Retirement Study (HRS).

Assessing the Demand for Micropensions among India's Poor.

Using new data from a field experiment in India, we test hypotheses about micropension design in a poor population. We elicit demand for the basic micropension in addition to variants with different minimum withdrawal ages, government match rates, and options for lump sum withdrawal. A majority (80%) of respondents report interest in the micropension, and the amount they are willing to contribute would be enough to cover about 40% of expected old-age consumption.

Optimal Financial Knowledge and Wealth Inequality.

We show that financial knowledge is a key determinant of wealth inequality in a stochastic lifecycle model with endogenous financial knowledge accumulation, where financial knowledge enables individuals to better allocate lifetime resources in a world of uncertainty and imperfect insurance. Moreover, because of how the U.S.

Time is money: Rational life cycle inertia and the delegation of investment management.

Many households display inertia in investment management over their life cycles. Our calibrated dynamic life cycle portfolio choice model can account for such an apparently 'irrational' outcome, by incorporating the fact that investors must forgo acquiring job-specific skills when they spend time managing their money, and their efficiency in financial decision making varies with age. Resulting inertia patterns mesh well with findings from prior studies and our own empirical results from Panel Study of Income Dynamics (PSID) data.

BORROWING FROM THE FUTURE? 401(K) PLAN LOANS AND LOAN DEFAULTS.

Most employers permit 401(k) plan participants to borrow from their retirement plan assets. Using an administrative dataset tracking over 800 plans for five years, we show that 20 percent of workers borrow at any given time, and almost 40 percent borrow at some point over five years. Also, workers borrow more when a plan permits multiple loans.

How Family Status and Social Security Claiming Options Shape Optimal Life Cycle Portfolios.

We show how optimal household decisions regarding work, retirement, saving, portfolio allocations, and life insurance are shaped by the complex financial options embedded in U.S. Social Security rules and uncertain family transitions.

Framing and Claiming: How Information-Framing Affects Expected Social Security Claiming Behavior.

This paper provides evidence that Social Security benefit claiming decisions are strongly affected by framing and are thus inconsistent with expected utility theory. Using a randomized experiment that controls for both observable and unobservable differences across individuals, we find that the use of a "breakeven analysis" encourages early claiming. Respondents are more likely to delay when later claiming is framed as a gain, and the claiming age is anchored at older ages.

Ambiguity aversion and household portfolio choice puzzles: Empirical evidence.

We test the relation between ambiguity aversion and five household portfolio choice puzzles: nonparticipation in equities, low allocations to equity, home-bias, own-company stock ownership, and portfolio under-diversification. In a representative US household survey, we measure ambiguity preferences using custom-designed questions based on Ellsberg urns. As theory predicts, ambiguity aversion is negatively associated with stock market participation, the fraction of financial assets in stocks, and foreign stock ownership, but it is positively related to own-company stock ownership.

Estimating ambiguity preferences and perceptions in multiple prior models: Evidence from the field.

We develop a tractable method to estimate multiple prior models of decision-making under ambiguity. In a representative sample of the U.S.

Financial Literacy and Economic Outcomes: Evidence and Policy Implications.

This paper reviews what we have learned over the past decade about financial literacy and its relationship to financial decision-making around the world. Using three questions, we have surveyed people in several countries to determine whether they have the fundamental knowledge of economics and finance needed to function as effective decision-makers. We find that levels of financial literacy are low not only in the United States.

How does retiree health insurance influence public sector employee saving?

Economic theory predicts that employer-provided retiree health insurance (RHI) benefits have a crowd-out effect on household wealth accumulation, not dissimilar to the effects reported elsewhere for employer pensions, Social Security, and Medicare. Nevertheless, we are unaware of any similar research on the impacts of retiree health insurance per se. Accordingly, the present paper utilizes a unique data file on respondents to the Health and Retirement Study, to explore how employer-provided retiree health insurance may influence net household wealth among public sector employees, where retiree healthcare benefits are still quite prevalent.

Financial Literacy and Financial Sophistication in the Older Population.

Using a special-purpose module implemented in the Health and Retirement Study, we evaluate financial sophistication in the American population over the age of 50. We combine several financial literacy questions into an overall index to highlight which questions best capture financial sophistication and examine the sensitivity of financial literacy responses to framing effects. Results show that many older respondents are not financially sophisticated: they fail to grasp essential aspects of risk diversification, asset valuation, portfolio choice, and investment fees.

Disaggregating activities of daily living limitations for predicting nursing home admission.

Objective: To examine whether disaggregated activities of daily living (ADL) limitations better predict the risk of nursing home admission compared to conventionally used ADL disability counts.

Data Sources: We used panel data from the Health and Retirement Study (HRS) for years 1998-2010. The HRS is a nationally representative survey of adults older than 50 years (n = 18,801).

The Economic Importance of Financial Literacy: Theory and Evidence.

This paper undertakes an assessment of a rapidly growing body of economic research on financial literacy. We start with an overview of theoretical research which casts financial knowledge as a form of investment in human capital. Endogenizing financial knowledge has important implications for welfare as well as policies intended to enhance levels of financial knowledge in the larger population.

How Financial Literacy Affects Household Wealth Accumulation.

This study isolates the causal effects of financial literacy and schooling on wealth accumulation using a new household dataset and an instrumental variables (IV) approach. Financial literacy and schooling attainment are both strongly positively associated with wealth outcomes in linear regression models, whereas the IV estimates reveal even more potent effects of financial literacy. They also indicate that the schooling effect only becomes positive when interacted with financial literacy.

FINANCIAL LITERACY AROUND THE WORLD: AN OVERVIEW.

In an increasingly risky and globalized marketplace, people must be able to make well-informed financial decisions. Yet new international research demonstrates that financial illiteracy is widespread when financial markets are well developed as in Germany, the Netherlands, Sweden, Japan, Italy, New Zealand, and the United States, or when they are changing rapidly as in Russia. Further, across these countries, we show that the older population believes itself well informed, even though it is actually less well informed than average.

Death spiral or euthanasia? The demise of generous group health insurance coverage.

Employers must determine the types of health care plans to offer and also set employee premiums for each plan provided. Depending on the structure of the employee share of premiums across different health insurance plans, the incentives to choose one plan over another are altered. If employees know premiums do not fully reflect the risk differences among workers, such pricing can give rise to a so-called "death spiral" due to adverse selection.

Aged-care support in Japan: perspectives and challenges.

This article explores economic aspects of the market for long-term care (LTC) in Japan. As the world's most rapidly aging nation, it is of interest to understand that country's current LTC system and projections of LTC utilization patterns and costs, as well as their potential drivers. Since Japan appears likely to experience important shortfalls in LTC in the future, the authors also discuss alternate forms of provision.