Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78 Page 79 Page 80 Page 81 Page 82 Page 83 Page 84 Page 85 Page 86 Page 87 Page 88 Page 89 Page 90 Page 91 Page 92 Page 93 Page 94 Page 95 Page 96 Page 97 Page 98 Page 99 Page 100 Page 101 Page 102 Page 103 Page 104 Page 105 Page 106 Page 107 Page 10872 A major policy debate in recent years has centered around expanding the scope of individual choice with regard to financial decision mak- ing. In this context, researchers and policy planners have become increasingly interested in knowing how well older Americans will adapt to trends in both the private and public sectors. The HRS poses to participants a large number of subjective probability questions which, in one sense, can be considered to be a large psychometric test of probabilistic thinking among more than 20,000 individuals. Thus, for the first time, researchers can provide empirical evidence about the relationship between probabilistic thinking and financial behavior for a nationally representative sample of households. One pioneering analysis constructed a measure of preciseness in probabilistic answers and related this to the likelihood of holding risky household assets and to the rate of growth of household net worth (Lillard and Willis 2001). Two results emerged: First, there was a wide range in the precision of probabilistic thinking throughout the popula- tion, and second, more precise probabilistic thinking led people to be willing to take more risks and to enjoy greater increases in wealth. At first blush, such a finding might be used to justify fears about expand- ing the scope for choice through IRAs, because significant portions of the population will be unable to exploit the benefits of choice. However, the study authors hasten to point out that this is a preliminary finding, and that the next step is to explore the degree to which individuals reduce uncertainty through experience with financial management (and therefore become better able to manage their own affairs to their benefit). For further information about subjective expectations, see page 36. Probabilistic Thinking and Financial Behavior I NCOME & WEALT H