Study conducted by Wharton professor Olivia Mitchell reveals that financial literacy goes down with age.
Credit: Grace ChenA new study co-authored by Wharton professor Olivia Mitchell reveals that the financial literacy score of a group of older adults fell by one percentage point on average each year.
The study — titled “Declining financial and health literacy among older men and women” — observed a group for 12 years of 1,075 older adults without dementia. Mitchell, who teaches insurance risk management at Wharton, joined three other researchers to investigate the group’s financial literacy over time.
According to the research, which was published in the March 2025 issue of The Journal of the Economics of Ageing, the group’s literacy score at a baseline of 69.6% fell “by about one percentage point per year on average.”
Each participant’s financial and health literacy was assessed with a set of 32 questions “designed to measure knowledge of health and financial information and concepts, as well as numeracy.” The questions were delivered in the form of multiple choice and true or false questions.
“The fact that people’s financial and health literacy falls by a percentage point per year of age is alarming,” Mitchell told Penn Today. “A 12% drop in performance in terms of financial and health literacy scores would take the baseline score from about 70% to below 60%.”
Of the surveyed participants, only 13% maintained their financial and health literacy scores throughout the study.
The team’s research built upon Mitchell’s 2020 research on potential methods to mitigate a literacy decline that is “parallel” with older men and women.
“Prior research has found that building human capital via educational and retirement planning programs, particularly starting young, builds financial resilience in later life,” the 2020 study read.
The March 2025 report notes that research findings may be used to inform economic models of decision-making — which assume that older adults continue to behave rationally until death.
“Our paper provides additional evidence that economic decision making models could become more realistic if they consider the impact of declining financial and health literacy on important financial decisions made in later life,” the authors wrote. “Our results imply that incorporated declining financial and health literacy into these models can be done relatively easily, in view of the fact that we find no gender-based differences in the rate or likelihood of decline.”
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