The Age of Reason: Financial Decisions over the Life-Cycle with Implications for Regulation

Paper: SSRN 973790

Abstract

Many consumers make poor financial choices and older adults are particularly vulnerable to such errors. About half of the population between ages 80 and 89 eith

Complexity vs Empirical Score

• Math Complexity: 2.0/10
• Empirical Rigor: 8.5/10
• Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: The paper relies on extensive empirical analysis of proprietary credit data and the Health and Retirement Survey, involving statistical modeling of age patterns in financial mistakes, but its mathematical content is primarily statistical and econometric (regressions) rather than dense theoretical formalism.

Research Flowchart

  flowchart TD
  A["Research Question:<br>How do financial decisions<br>change with age?"]
  B["Methodology:<br>Life-Cycle Model with<br>Behavioral & Cognitive Traits"]
  C["Data/Inputs:<br>Health and Retirement Study<br>(HRS) Survey Data"]
  D["Computation:<br>Estimation of Life-Cycle Model<br>Simulation of Wealth & Choices"]
  E["Key Findings:<br>1. Financial mistakes peak<br>in late 60s<br>2. Cognitive decline drives<br>poor decisions<br>3. Vulnerability rises<br>after age 80"]
  
  A --> B
  B --> C
  C --> D
  D --> E