Research Briefs for Financial Educators: Financial Literacy, Personality Traits, and Retirement

By Barbara O’Neill, Ph.D., CFP®,

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Personal finance research informs high-quality financial education briefings, publications, and 1:1 financial counseling with clients. Below are findings and implications for practice from four recent studies:

Financial Literacy Confidence – Yeh & Ling (2022) explored the effect of confidence with respect to financial literacy, stock market investing, and retirement savings. They found that confidence can have an effect equal to or greater than financial literacy. Specifically, for people with low financial literacy, overconfidence can encourage taking financial action, while for people with high financial literacy, underconfidence can deter action. Overconfidence effects were weaker for women than for men.

  • Implications: Study results also indicated that 41% of respondents either overestimated or underestimated their financial knowledge, indicating a need to strengthen clients financial knowledge through financial education programs as well as boosting their confidence through 1:1 financial counseling and coaching. Guidance is especially important for underconfident individuals and women, due to the marginal effects of confidence.

Personality Traits and Financial Outcomes – Exley et al. (2022) studied the relationship of personality traits and financial outcomes. Moving beyond the “Big Five” (OCEAN) personality traits, they identified three profiles (Under Controlled, Resilient, and Over Controlled) associated with income, risk tolerance, and life satisfaction. These patterns held even after controlling for gender, education, and age. The largest group, those closest to “overcontrolled,” scored relatively high on conscientiousness and agreeableness.

  • Implications: This study showed that risk tolerance scores may not provide a complete picture of someone’s likelihood of taking an appropriate level of risk. Personality traits also have a role .“Resilients” may need a nudge toward more risky assets and “Overcontrolled” individuals may also benefit from taking more financial risk. “Undercontrolled” individuals may have trouble staying invested during periods of market volatility.

Appointments vs. Commitments – This study by Derksen et al. (2021) investigated the effects of a soft commitment (e.g., health care appointment) vs. a hard commitment (e.g., advance payment of money) in prompting positive behavior (e.g., routine testing). Results indicated that appointments are much more effective than hard commitment devices in terms of treatment effects and cost-effectiveness. Appointments appear to work best, especially for people with self-control and limited memory problems.

  • Implications: A take-away from this study is that hard commitments that cost money don’t necessarily prompt subsequent action. Rather, appointments may be the best way to engage with clients on a routine basis and motivate them to take action. Instead of HIV testing (the setting for this study), appointments could easily apply to annual “financial physicals” (e.g., net worth, credit score, budget) and specific tasks such as portfolio rebalancing. Mobile phone apps and websites make it easy to schedule appointments and issue reminders.

Retirement Glide Paths – Waggle et al. (2022) studied sustainable withdrawals from retirement savings in the current low-interest rate environment for bonds where investors receive negative real returns. Their analysis considered scenarios where bond rates and inflation return to historical averages in 5, 10, 15, 20, 25, and 30 years or never and concluded that retirees are best served with decreasing glide paths that boost early asset allocation to stock. Asset allocations and glide paths that worked in the past are no longer safe choices.

  • Implications: This study contradicts the oft-stated assumption that investors should automatically become more conservative when they retire. With higher early allocation to stock, decreasing glide path options (i.e., a shift to bonds over time) result in lower failure (i.e., running out of money) rates. The higher the initial stock position in someone’s portfolio, the more glide path options become feasible and the less choice of glide path selection matters. Financial educators need to update what they are teaching with respect to investing for older adults.

Derksen, L., Kerwin, J.T., Reynoso, N.O., & Sterck, O. (2021) Appointments: A more effective commitment device for health behaviors. SSRN,

Exley, J., Doyle, P.C., Grable, J., & Campbell, W.K. (2022). OCEAN wealth profiles: A latent profile analysis of personality traits and financial outcomes. Personality and Individual Differences, 185.

Waggle, D., Moon, G., & Lee H. (2022). Retirement glide oath options in an uncertain, low-interest-rate environment. Journal of Financial Planning, 35(3), 68-88.

Yeh, T. & Ling, Y. (2022). Confidence in financial literacy, stock market participation, and retirement planning. Journal of Family and Economic Issues, 43, 169-186.

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