Cognitive abilities, self-efficacy, and financial behavior
The number of older Americans has risen dramatically in recent decades, and they are taking increasing responsibility for managing their accumulated wealth.
Evidence from the aging literature indicates that cognitive abilities decline sharply after age 60. This deterioration could make older adults vulnerable to financial management inefficiency, which can affect their financial well-being and has broad implications on society. Yet despite the growing salience of the issue, our understanding of factors that contribute to financial behavior among older adults is limited. This paper examines how cognitive aging, a normal and inevitable consequence of biological aging, affects the financial well-being of the older population.
The paper’s findings are based on an analysis of longitudinal data from the U.S. Health and Retirement Study, a nationally representative study of Americans over age 50.
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