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Objective and subjective memory: Impact on the financial behavior of older adults in the United States

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  • Shin, Su Hyun

Abstract

This study adds to the literature on the adverse effects of cognitive decline among older adults focusing on financial decisions. The article investigates the impact of objective and subjective memory on the financial decisions of older adults, such as asset holdings, allocation, and financial health. In general, older adults with higher objective memory have better financial outcomes. A higher objective memory leads to greater financial assets including stocks, cash-equivalent, individual retirement accounts, bonds, and thus total financial assets. It also leads to a smaller share in cash-equivalent. Older adults with better objective memory are more likely to have sufficient liquid assets to cover short-term expenses and they save enough to meet retirement adequacy. On the other hand, a higher subjective memory leads to fewer financial assets, retirement inadequacy, and insolvency. These findings have important implications for older adults who experience memory loss, and their families.

Suggested Citation

  • Shin, Su Hyun, 2021. "Objective and subjective memory: Impact on the financial behavior of older adults in the United States," The Journal of the Economics of Ageing, Elsevier, vol. 19(C).
    • Handle: RePEc:eee:joecag:v:19:y:2021:i:c:s2212828x21000207
    DOI: 10.1016/j.jeoa.2021.100327
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    References listed on IDEAS

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    1. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2003. "Instrumental variables and GMM: Estimation and testing," Stata Journal, StataCorp LP, vol. 3(1), pages 1-31, March.
    2. George M Korniotis & Alok Kumar, 2011. "Do Older Investors Make Better Investment Decisions?," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 244-265, February.
    3. Oechssler, Jörg & Roider, Andreas & Schmitz, Patrick W., 2009. "Cognitive abilities and behavioral biases," Journal of Economic Behavior & Organization, Elsevier, vol. 72(1), pages 147-152, October.
    4. Arthur Lewbel, 2012. "Using Heteroscedasticity to Identify and Estimate Mismeasured and Endogenous Regressor Models," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 30(1), pages 67-80.
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    Cited by:

    1. Xuefeng Li & Han Yang & Jin Jia, 2022. "Impact of energy poverty on cognitive and mental health among middle-aged and older adults in China," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-13, December.

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    More about this item

    Keywords

    Memory; Asset holdings; Asset allocation; Financial health; Older adults; United States;
    All these keywords.

    JEL classification:

    • D9 - Microeconomics - - Micro-Based Behavioral Economics
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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