Elderly consumers and financial choices: A systematic review

The purpose of this paper is to investigate elderly choices and behaviors in financial services markets. A systematic review of a five-decade period (1970–2019) of academic research in the marketing field was carried out in order to identify elderly consumers’ decisions regarding financial asset management and legacy, highlighting the main findings of extant research and practical implications for marketers. Results shed light on financial asset management in terms of welfare, retirement planning, and investments for old age, as well as legacy practices in terms of special possessions, charities, and rites of passage. The study underlines the need to consider the heterogeneous nature of elderly consumers’ values and lifestyles in designing strategies for financial services and products, emphasizing that demographic differences alone are not adequate to effectively define market segments. Furthermore, the role of mixed marketing approaches considering elderly choices are discussed, together with implications for companies that want to target such consumer target

Financial Fraud among Older Americans: Evidence and Implications

The consequences of poor financial capability at older ages are serious and include making mistakes with credit, spending retirement assets too quickly, and being defrauded by financial predators. Because older persons are at or past the peak of their wealth accumulation, they are often the targets of fraud. Our project analyzes a module we developed and fielded in the 2016 Health and Retirement Study (HRS). Using this dataset, we evaluate the incidence and risk factors for investment fraud, prize/lottery scams, and account misuse, using regression analysis. Relatively few HRS respondents mentioned any single form of fraud over the prior five years, but nearly 5% reported at least one form of investment fraud, 4% recounted prize/lottery fraud, and 30% indicated that others had used/attempted to use their accounts without permission. There were few risk factors consistently associated with such victimization in the older population. Fraud is a complex phenomenon and no single factor uniquely predicts victimization. The incidence of fraud could be reduced by educating consumers about various types of fraud and by increasing awareness among financial service professionals

Financial Literacy, Experience, and Age Differences in Monetary Sequence Preferences

The emerging research on age differences in monetary sequence preferences suggests that older adults make decisions that are normatively correct from the standpoint of economic theory when choosing to receive larger versus smaller amounts of money sooner than later, but make non-optimal decisions about paying money. In an adult life-span sample (N = 594, aged 20-88, Mage = 46.48, SD= 15.16) recruited through MTurk, the present study examined age differences in monetary sequence preferences. Participants received eight hypothetical scenarios that described monetary events, and completed measures of financial literacy and financial experience. Older age was associated with preferences to receive larger amounts of money sooner than smaller amounts, the normatively correct decision, but age was not associated with preferences for sequences of paying money. Older adults’ greater financial literacy and greater financial experience partially accounted for their normatively correct preferences for sequences of receiving money. Findings have implications such that interventions could target both financial literacy and experience to facilitate financial decision making across adulthood

Financial Literacy and Financial Behavior at Older Ages

Recent research documents that people are increasingly entering old age with more debt than ever before and with little or no retirement planning. This paper examines some reasons why older people’s financial behaviors depart from the predictions of the life-cycle model, where the latter predicts that older persons would be at the peak of their wealth accumulation process and manage their money so as not to run out of savings in retirement. Drawing on the rapidly growing literature on financial literacy and financial behavior at older ages, we highlight findings on financial literacy patterns. We also document that “better” financial behaviors are strongly associated with greater financial literacy in later life. We close with some thoughts regarding limitations, policy implications, and next steps

LOOSENING THE GRIP:Delegation of Financial Decision-Making to Spouse in Old Age

Gender inequality in control of household finances is a well-known phenomenon. We investigate whether such imbalance also extends to the delegation of financial decision-making (FDM) responsibilities to one’s spouse in old age. This study reports the results from an incentivized delegation experiment among Australian couples of age ≥60 years. Participants were required to complete FDM tasks, which they had the option of completing independently or delegating to their spouse. The odds of women delegating to their spouse were found to be nearly 25 times higher than that of men. This gender difference in delegation was not explained by differences in financial competence, education, age, or cognitive status. The likelihood of delegation increased with the financial competence of the spouse. Individuals who had the option to delegate selectively delegated more often and earlier than those who could only delegate irrevocably. Our evidence suggests that gender norms and control play a dominant role in the delegation of FDM within older couples and can override specialization or efficiency considerations.</p

Effects of Exercise on Decision-Making under Stress

Prolonged exposure to stress can be very damaging to an individual both physically and mentally. Stress can have a negative impact on thoughts, behaviors, and feelings. Stress can also inhibit a person’s ability to make decisions. Past studies have demonstrated that physical activity can combat the negative effects of stress on the mind and body. The purpose of the present study was to investigate whether long-term exercise and immediate exercise can mitigate the effects of stress on decision-making. Participants were prescreened and categorized into physically active or sedentary groups. Both groups completed the cold pressor stressor task, after which half of each group exercised immediately on a stationary bike. All participants then completed a financial decision-making task. Blood pressure was recorded at various points during the procedure. It was hypothesized that those who were generally more physically active or who engaged in immediate exercise would respond more accurately on the financial decision-making task compared to those who were generally sedentary or those who did not exercise immediately prior to the task. An analysis of variance test indicated no statistically significant effects of either variable on decision-making. The results did not support the hypothesis. Separate comparisons of systolic and diastolic blood pressure measurements did not reveal any statistically significant differences either. Implications, limitations, and future directions are discussed, including the impact of factors such as the COVID-19 pandemic, sample size, age, and the use of automated blood pressure monitors

Institutional and individual investors: Saving for old age

This paper brings together the academic literature on individual and institutional investors in order to understand the nature of difficulties faced by them and set the background for the Special Issue. This introductory article and the papers in the Special Issue contribute to the debate on how to support individuals in their savings commitments and investment decision-making and whether and how institutional investors have fulfilled their role in supporting the development of the funded pension industry. There are three main conclusions: (i) individual investors are not ready for the role that has been assigned to them in the pension industry, (ii) institutional investors are a long way short of establishing healthy relational contracts and trustworthy relationships with their clients, and (iii) more effective regulation may be needed

Risk factors for fraud victimization:The role of socio-demographics, personality, mental, general, and cognitive health, activities, and fraud knowledge

Fraud against individuals is a major and growing problem. Understanding why some people fall victim to fraud, while others do not, is crucial in developing effective prevention strategies. We therefore studied the effect of socio-demographics, personality traits, mental, general, and cognitive health, routine Internet activities, and prior fraud knowledge on general fraud victimization, susceptibility to fraud attempts, and exposure to fraud attempts. We modeled data from a Dutch fraud victimization survey, using an exhaustive fraud taxonomy and a representative sample for which an elaborate set of historical background variables were available. Results show that there is no clear personality or other profile of those most at risk for fraud, except for having low self-control, having a non-Western, immigrant background or being a frequent Internet user. Improving fraud knowledge could be an effective way to prevent fraud victimization by reducing susceptibility to attempts.</p

Time is Money: Rational Life Cycle Inertia and the Delegation of Investment Management

Many households display inertia in investment management over their life cycles. Our calibrated dynamic life cycle portfolio choice model can account for such an apparently ‘irrational’ outcome, by incorporating the fact that investors must forgo acquiring job-specific skills when they spend time managing their money, and their efficiency in financial decision making varies with age. Resulting inertia patterns mesh well with findings from prior studies and our own empirical results from Panel Study of Income Dynamics (PSID) data. We also analyze how people optimally choose between actively managing their assets versus delegating the task to financial advisors. Delegation proves valuable to both the young and the old. Our calibrated model quantifies welfare gains from including investment time and money costs as well as delegation in a life cycle setting