Financial literacy and retirement planning in the United States

TLDR

The study examines financial literacy in the United States using the National Financial Capability Study to identify groups with low literacy. The authors analyze data from the National Financial Capability Study, focusing on age, gender, and education levels to assess literacy. The analysis reveals that financial literacy is especially low among young people, women, and the less‑educated, with Hispanics and African‑Americans scoring lowest, yet all groups overestimate their knowledge; higher literacy is strongly associated with retirement planning, suggesting targeted literacy programs could improve preparedness.

Abstract

Abstract 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.