We report on research that links survey and administrative data to investigate how within-couple differences in preferences and financial decision-making abilities affect household finances. We study whether within-household differences in preferences or financial decision-making abilities influence household choices and, thus, retirement readiness. Initial results indicate that, while individual variation in saving and portfolio preferences and decision-making ability is significantly related to individual variation in financial outcomes, there is only modest evidence that within-household variation in these measures is associated with between-household differences in expenditure, liquidity, and outcomes.
The Alignment of Household Preferences and Financial Decisions Leading up to Retirement
Published: 2022
Abstract
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Key Findings
- The initial results suggest that, for purposes of explaining important household financial outcomes, differences in average measures of preferences and abilities within households are more important than within-household differences in preferences and abilities.
- We find no evidence of an important relationship between the measure of decision-making ability (DMA) and expenditures.
- There is some evidence that within-household conflicts in risk preferences are associated with higher levels of household expenditure.
- The average levels of time preference or decision-making ability are, however, more strongly associated with between-household differences in spending and liquidity.