How does aging affect financial decision making?

Abstract

The brief's key findings are: (1) With the shift from traditional pensions to 401(k) plans, the welfare of retirees depends increasingly on their ability to make sound financial decisions. (2) Using a dataset that follows a group of older individuals in the Chicago area, the analysis examines how aging affects financial decision making. (3) Participants who suffer cognitive decline experience a reduction in their financial literacy but no change in their confidence in managing their money. (4) Perhaps not surprisingly then, while they are more likely to get help with financial decisions, more than half retain primary responsibility for managing their money.