Research Briefs for Financial Educators

By Barbara O’Neill, Ph.D., CFP®
Martie Gillen, Ph.D., MBA, AFC®, CFLE

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

Inflation and Financial Stress

A study by the Employee Benefit Research Institute found that high rates of inflation in 2022 appeared to have impacted worker attitudes toward their financial well-being. Between 2021 and 2022, an increasing percentage of workers reported concern about their financial well-being and that they were less prepared for unexpected financial events and increasingly stressed about their financial future. Paying monthly bills was the top concern of workers struggling to manage multiple financial priorities.

- Implications: Findings of this study indicate “slippage” in the self-reported financial status of U.S. households in 2022. For example, 80% of employees described their level of debt as a major or minor problem in 2022, up from 65% in 2021. Perhaps this is because expanded tax credits and stimulus money available in 2020-2021 were not available. The results indicated that more people are struggling financially and need help with basic money management skills.

Longevity Illiteracy

A George Washington University/TIAA Institute study found more than half of U.S. adults don’t know how long people generally live in retirement. Given their possible longevity, this could result in them failing to save enough money to last their lifetime. The longevity literacy of women was greater than men with 43% demonstrating strong longevity knowledge compared to 32% of men. On average, at age 60, men may live another 22 years and women, 25 years longer.

- Implications: A good understanding of life expectancy is necessary for people to make accurate retirement savings calculations. Life expectancy can have a greater impact than even record-high inflation on how long retirement savings will last. Once people become aware that they could live a long life, they also need to learn strategies to deal with possibly living long (e.g., catch-up contributions and delayed Social Security benefits).

Financial Advice-Seeking

Ludwig et al. conducted a cross-racial examination of factors associated with advice-seeking behavior using data from the 2019 Survey of Consumer Finances. They found that Black respondents were less likely than White respondents to utilize a professional for investment decisions. Rather, they were more likely to seek out a non-professional information source. Income, education, age, and financial literacy were statistically significant and positively associated with financial advice-seeking.

- Implications: Study results indicate that levels of trust and preferred communication methods for seeking advice may vary among different races and that race plays an important role in financial advisor utilization. Those interested in increasing outreach to Black households should understand advice-seeking preferences through a race/ethnicity lens and perhaps use less traditional channels (e.g., podcasts, online chat groups) and referrals by Black clients.