Hostname: page-component-848d4c4894-v5vhk Total loading time: 0 Render date: 2024-06-20T17:29:28.215Z Has data issue: false hasContentIssue false

Financial literacy and retirement planning in the United States*

Published online by Cambridge University Press:  11 October 2011

The George Washington University School of Business and Netspar (e-mail:
The Wharton School, University of Pennsylvania (e-mail:


We examine financial literacy in the US using the new National Financial Capability Study, wherein we demonstrate that financial literacy is particularly low among the young, women, and the less-educated. Moreover, Hispanics and African-Americans score the least well on financial literacy concepts. Interestingly, all groups rate themselves as rather well-informed about financial matters, notwithstanding their actual performance on the key literacy questions. Finally, we show that people who score higher on the financial literacy questions are much more likely to plan for retirement, which is likely to leave them better positioned for old age. Our results will inform those seeking to target financial literacy programmes to those in most need.

Copyright © Cambridge University Press 2011

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)


Agarwal, Sumit John Driscoll, Gabaix, Xavier and Laibson, David (2009) The age of reason: financial decisions over the lifecycle. Brookings Papers on Economic Activity, (2) 51–117.CrossRefGoogle Scholar
Ariel Investments (2009) 401(k) Plans in Living Color: A Study of 401(k) Savings Disparities across Racial and Ethnic Groups. Chicago: The Ariel/Hewitt Study.Google Scholar
Atkinson, Adele, McKay, Stephen, Kempson, Elaine and Collard, Sharon (2007) Levels of financial capability in the UK: results of a baseline survey. Public Money and Management, 27(1): 2936.CrossRefGoogle Scholar
Behrman, Jere, Olivia, S., Mitchell, Cindy Soo and Bravo, David (2010) Financial Literacy, Schooling, and Wealth Accumulation. NBER WP 16452.CrossRefGoogle Scholar
Bernheim, and Douglas, (1995) Do households appreciate their financial vulnerabilities? An analysis of actions, perceptions, and public policy. In Tax Policy and Economic Growth. Washington, DC:American Council for Capital Formation, pp. 130.Google Scholar
Bernheim, and Douglas, (1998) Financial illiteracy, education and retirement saving. In Mitchell, O. S. and Schieber, S. (eds), Living with Defined Contribution Pensions. Philadelphia, PA: University of Pennsylvania Press, pp. 3868.Google Scholar
Bernheim, Douglas, Garrett, Daniel and Maki, Dean (2001) Education and saving: the long-term effects of high school financial curriculum mandates. Journal of Public Economics, 85: 35565.Google Scholar
Campbell, and John, (2006) Household finance. Journal of Finance, 61: 15531604.CrossRefGoogle Scholar
Crossan, Diana, Feslier, David and Hurnard, Roger (2011) Financial Literacy and Retirement Planning in New Zealand, this volume.CrossRefGoogle Scholar
Financial Industry Regulatory Authority (FINRA) (2010) Financial Capability in the United States: National Survey, Executive Summary. Washington, DC: FINRA. Available online at Scholar
Hastings, Justine and Mitchell, Olivia S. (2011) How Financial Literacy and Impatience Shape Retirement Wealth and Investment Behaviors. NBER Working Paper No. 16740.CrossRefGoogle Scholar
Hastings, Justine and Tejeda-Ashton, Lydia (2008) Financial Literacy, Information, and Demand Elasticity: Survey and Experimental Evidence from Mexico. NBER Working Paper n. 14538.CrossRefGoogle Scholar
Hilgert, Marianne, Hogarth, Jeanne and Beverly, Sondra (2003) Household financial management: the connection between knowledge and behavior. Federal Reserve Bulletin, 89: 309322.Google Scholar
Hogarth, Jeanne, Anguelov, Chris and Lee, Jinkook (2004) Why don't households have checking accounts? Journal of Consumer Affairs, 38: 134.CrossRefGoogle Scholar
Hurst, Erik and Lusardi, Annamaria (2004) Liquidity constraints, household wealth, and entrepreneurship. Journal of Political Economy, 112: 319347.CrossRefGoogle Scholar
Hurst, Erik, Lusardi, Annamaria, Kennickell, Arthur and Torralba, Francisco (2010) The importance of business owners in assessing the size of precautionary savings. Review of Economics and Statistics, 92: 6169.CrossRefGoogle Scholar
Lusardi, and Annamaria, (1999) Information, expectations, and savings for retirement. In Aaron, Henry (ed.), Behavioral Dimensions of Retirement Economics. Washington, DC: Brookings Institution Press and Russell Sage Foundation, pp. 81–115.Google Scholar
Lusardi, and Annamaria, (2005) Explaining Why So Many Households Do not Save. Working Paper, Dartmouth College.Google Scholar
Lusardi, and Annamaria, (2008) Financial Literacy: An Essential Tool for Informed Consumer Choice? Working Paper, Joint Center for Housing Studies, Harvard University.CrossRefGoogle Scholar
Lusardi, and Annamaria, (2009) U.S. household savings behavior: the role of financial literacy, information and financial education programs. In Foote, C., Goette, L. and Meier, S. (eds), Policymaking Insights from Behavioral Economics. Boston: Federal Reserve Bank of Boston, pp. 109149.Google Scholar
Lusardi, and Annamaria, (2011) Americans’ Financial Capability. NBER Working Paper No. 17103.CrossRefGoogle Scholar
Lusardi, Annamaria and Beeler, Jason (2007) Saving between cohorts: The role of planning. In Madrian, B., Mitchell, O.S. and Soldo, B. (eds), Redefining Retirement: How Will Boomers Fare? Oxford: Oxford University Press, pp. 271295.CrossRefGoogle Scholar
Lusardi, Annamaria and Mitchell, Olivia S. (2007 a) Baby boomer retirement security: the role of planning, financial literacy, and housing wealth. Journal of Monetary Economics 54: 205224.CrossRefGoogle Scholar
Lusardi, Annamaria and Mitchell, Olivia S. (2007 b) Financial literacy and retirement preparedness: evidence and implications for financial education. Business Economics, January 2007, pp. 3544.CrossRefGoogle Scholar
Lusardi, Annamaria and Mitchell, Olivia S. (2008 a) Planning and financial literacy. how do women fare? American Economic Review, 98(2): 413417.CrossRefGoogle Scholar
Lusardi, Annamaria and Mitchell, Olivia S. (2008 b) How Much Do People Know About Economics and Finance? Financial Illiteracy and the Importance of Financial Education, Policy Brief No. 5, MRRC, March 2008.Google Scholar
Lusardi, Annamaria and Mitchell, Olivia S. (2009) How Ordinary Consumers Make Complex Economic Decisions: Financial Literacy and Retirement Readiness. NBER Working Paper No. 15350.CrossRefGoogle Scholar
Lusardi, Annamaria and Mitchell, Olivia S. (2011) Financial literacy and planning: implications for retirement wellbeing, forthcoming. In Lusardi, Annamaria and Mitchell, Olivia (eds), Financial Literacy: Implications for Retirement Security and the Financial Marketplace. Oxford: Oxford University Press (forthcoming).Google Scholar
Lusardi, Annamaria, Mitchell, Olivia S. and Curto, Vilsa (2010) Financial literacy among the young. Journal of Consumer Affairs, 44(2): 358380.CrossRefGoogle Scholar
Lusardi, Annamaria and Tufano, Peter (2009 a) Debt Literacy, Financial Experiences, and Overindebtedness. NBER Working Paper No. 14808.CrossRefGoogle Scholar
Lusardi, Annamaria and Tufano, Peter (2009 b) Teach workers about the peril of debt. Harvard Business Review, November, pp. 2224.Google Scholar
Mandell, and Lewis, (2008), Financial education in high school. In Lusardi, Annamaria (ed.), Overcoming the Saving Slump: How to Increase the Effectiveness of Financial Education and Saving Programs. Chicago, IL: University of Chicago Press, pp. 257279.Google Scholar
Moore, and Danna, (2003) Survey of Financial Literacy in Washington State: Knowledge, Behavior, Attitudes, and Experiences. Technical Report n. 03–39, Social and Economic Sciences Research Center, Washington State University.Google Scholar
National Council on Economic Education (NCEE) (2005) What American Teens and Adults Know about Economics. Washington, DC: NCEE.Google Scholar
National Commission on Fiscal Responsibility and Reform (2010) The Moment of Truth: Report of the National Commission on Fiscal Responsibility and Reform. Available online at Scholar
Organization for Economic Co-operation and Development (2005) Improving Financial Literacy: Analysis of Issues and Policies. Paris, France: OECD.Google Scholar
Poterba, James, Venti, Steve and Wise, David (2008) The changing landscape of pensions in the United States. In Lusardi, Annamaria (ed.), Overcoming the Saving Slump: How to Increase the Effectiveness of Financial Education and Saving Programs. Chicago, IL: University of Chicago Press, pp. 1746.Google Scholar
President's Advisory Committee on Financial Literacy (PACFL) (2008) Annual Report to the President: Executive Summary.Google Scholar
van Rooij, Maarten, Lusardi, Annamaria and Alessie, Rob (2011) Financial literacy and stock market participation. Journal of Financial Economics, 101(2): 449472.CrossRefGoogle Scholar
Yakoboski, Paul and Dickemper, Jennifer (1997) Increased Saving but Little Planning: Results of the 1997 Retirement Confidence Survey, EBRI Issue Brief, 121.Google Scholar