October 31, 2011
We ask older Americans to make complicated financial decisions about Social Security, Medicare, retirement distributions and more—just when they are losing their fastball.
Regardless of gender or education level, Americans become considerably less literate about all things money after age 60, according to a new study.
The scores on a test measuring knowledge of investments, insurance, credit and money basics fell about 2% each year starting after age 60, falling from about 59% correct for those in their 60s to a dismal 30% for those 80 and older, according to Michael Finke, an associate professor at Texas Tech University and a co-author of the study.
Here's what's worse: Our confidence in our financial decision-making abilities rises with age. We are not older and wiser. Rather, we are older, less smart and overconfident.
This notion of confidence rising while financial literacy is falling spells trouble for that group of Americans that now represents more than 12% of the population and controls half of all the financial wealth in America, according to Mr. Finke, who is also head of Texas Tech University's Ph.D. in financial-planning program.