Pension Plan Types and Financial Literacy in Later Life.

TitlePension Plan Types and Financial Literacy in Later Life.
Publication TypeJournal Article
Year of Publication2019
AuthorsLi, Y, Burr, J, Miller, EAlan
JournalGerontologist
Volume59
Issue2
Pagination260-270
ISSN Number1758-5341
KeywordsFinancial literacy, Pensions, Retirement Planning and Satisfaction
Abstract

Background and Objectives: The ongoing shift from defined benefit (DB) to defined contribution (DC) pension plans means that middle-aged and older adults are increasingly being called upon to manage their own fiscal security in retirement. Yet, half of older Americans are financially illiterate, lacking the knowledge and skills to manage financial resources. This study investigates whether pension plan types are associated with varying levels of financial literacy among older Americans.

Research Design and Methods: Cross-sectional analyses of the 2010 Health and Retirement Study (HRS) (n = 1,281) using logistic and linear regression models were employed to investigate the association between different pension plans and multiple indicators of financial literacy. The potential moderating effect of gender was also examined.

Results: Respondents with DC plans, with or without additional DB plans, were more likely to correctly answer various financial literacy questions, in comparison with respondents with DB plans only. Men with both DC and DB plans scored significantly higher on the financial literacy index than women with both types of plans, relative to respondents with DB plans only.

Discussion and Implications: Middle-aged and older adults, who are incentivized by participation in DC plans to manage financial resources and decide where to invest pension funds, tend to self-educate to improve financial knowledge and skills, thereby resulting in greater financial literacy. This finding suggests that traditional financial education programs may not be the only means of achieving financial literacy. Further consideration should be given to providing older adults with continued, long-term exposure to financial decision-making opportunities.

DOI10.1093/geront/gnx135
User Guide Notes

http://www.ncbi.nlm.nih.gov/pubmed/28958076?dopt=Abstract

Alternate JournalGerontologist
Citation Key9358
PubMed ID28958076