Study identifies eight key findings for financial well-being in older Americans

Older adults who save money and engage in day-to-day money management – as well as those who set financial goals, consult a budget and prepare action plans — have greater financial well-being than those who don’t, according to a report made public Friday by the federal consumer financial protection agency.

In its Financial Well-being of Older Americansreport, the Bureau of Consumer Financial Protection (BCFP, formerly known as the CFPB) said that financial knowledge, skill and behaviors among older Americans were among eight “key findings.” Those key findings (which also included age, individual characteristics, employment and retirement, housing, family and living arrangements, debt and health) were identified through results from the agency’s 2017 National Financial Well-Being Survey (fielded in 2016). That survey examined the distribution of financial well-being scores for adults ages 62 and older in the U.S.

Scores in the survey are based on the agency’s 2015 Financial Well-Being Scale, which consists of 10 questions. An individual’s response to each of the items in the scale yields a score, the bureau said, which is a standardized number between 0 and 100 that quantifies a person’s underlying level of financial well-being.

Overall, the bureau said its study found a higher average financial well-being score for older adults than younger adults. “The differences in financial well-being scores by age are likely the result of a combination of factors that are associated with a person’s stage in the life-cycle,” the bureau said. “For instance, many older adults, compared to their younger counterparts, have lower amounts of and fewer debts, higher savings and other safety nets, lower housing costs, and health insurance coverage.”

But the study also shows that the “positive relationship” between age and financial well-being begins to decline after age 75. “This decline may be due to poor health, living alone, and decreased ability to manage finances, which likely become more common after age 75,” the study stated. “The results also show that despite the increase in financial well-being scores with age, over one-fifth of older adults have scores that indicate that they are struggling financially at each stage of the life cycle.”

Along those lines, the study concluded, “the positive relationship between age and financial well-being could diminish in light of trends showing that a larger share of older adults reaching age 60 carry mortgage and other debts, and have limited or no retirement savings.”

Other key findings of the study included:

  • Age: Older adults have a higher average financial well-being score than younger adults.
  • Individual Characteristics: Across all subgroups of older Americans, financial well- being levels vary and overlap significantly.
  • Employment and retirement: Older adults who experience an unexpected job loss or reduction in work hours have lower financial well-being scores than those who remain in the workforce. In addition, an unplanned retirement is negatively associated with older adults’ financial well-being. Older adults who have a defined contribution retirement plan and a pension have higher financial well-being scores than older adults with one type of plan or no retirement plan.
  • Housing:Older homeowners have higher financial well-being scores than those who do not own a home.
  • Family and living arrangements: Older adults living alone have lower financial well- being scores than older adults who live with others.
  • Debt: Older adults who owe credit card and education debt have significantly lower financial well-being scores than older adults who do not have these debts.
  • Poor health is negatively associated with financial well-being; confusion or memory loss and having a health emergency are also negatively associated with financial well-being.

Financial Well-being of Older Americans