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 108AGING IN THE 21S T CENTURY 58 assets, businesses and real estate fall dramatically with age, while liquid assets rise with age. Beyond these changes associated with normal aging, negative changes in health often lead to selling the home, vehicles, businesses and real estate. The share of liquid assets increases with poor health. Widowhood has a similar effect on changes over time in the household wealth portfolio. Hurd and Rohwedder (2010a) use longitudi- nal data from CAMS data to explore the impact of OOPM on retirement preparation. Some households report very large OOPM spending, which could serve as a powerful motivation to conserve wealth especially for those with higher socioeconomic status because they are much more likely to live to older ages. Overall, OOPM spending substantially reduces the economic preparation of some households, especially given that individuals can experience multiple health problems and events over time. Single female households are most affected since they tend to have lower amounts of wealth to pay for these expenses. Taking OOPM expenses into account increases the estimate of the number of people living in poverty. Butrica et al. (2010) compare the official poverty measure with alternatives that account for OOPM costs and find a larger share of older people living in poverty if OOPM expenses are included. Yilmazer and Scharff (2013) examine indi- viduals who are at higher risk of OOPM expenses. They select a sample of HRS participants aged 51 to 61 and married (or living with a partner) from 1992 through at least 2002. In this younger sample, during the period of follow-up, they find no evidence that couples at risk of at least one member experiencing work-limiting health prob- lems have lower wealth in the follow-up period. It may be that the impact of health on wealth is not apparent for less acute health events. Financial Literacy and Planning A common-sense assumption is that people who have more information about how to plan for retirement and actually do plan for retirement are likely to end up with more retirement savings. Yet it is unclear exactly what skills and information are required for good retirement planning. The HRS provides information on financial deci- sion-making, sources of financial information, and general financial literacy. Three questions are used to assess financial literacy: one each on compound interest, effects of inflation, and risk diversification (see facing page). Lusardi and Mitchell (2011) find that half of respondents are able to give the correct response to the interest and inflation questions, and only one-third correctly answer the risk diversification ques- tion. About 30% of respondents report having developed a plan for retirement saving; of these, about two-thirds report being able to stick with the plan. People who report having a plan are also more likely to report using formal sources of information like financial experts or retirement calculators. Early Baby Boomers are somewhat less likely that the original HRS cohort to report that they had thought about retirement, an indicator of retirement planning (Lusardi and Mitchell 2007). Their wealth is somewhat higher than the earlier cohort, but this is largely due to larger home eq- uity values in 2004, prior to the Great Recession. Even accounting for demographic and other factors that may be associated with retirement planning, those with greater financial literacy are more likely to say they had thought about retirement and hold higher levels of wealth. Retirement planning may have other benefits Negative changes in health often lead to selling the home, vehicles, businesses and real estate.