Abstract
Using a sample of 2621 respondents from the 2014 Health and Retirement Study (HRS), this study identifies factors associated with who makes complex financial decisions among older couples. Our results show that the bargaining power of wives has a positive association with their decision-making about savings, investments, and health insurance, while the power of husbands is negatively associated with wives being more responsible for decisions about health insurance and tax filing. Moreover, while the husband’s sense of control, risk tolerance, and cognitive ability are associated with decisions for all financial decisions, the wife’s sense of control, risk tolerance, and cognitive ability are related to some financial decisions only. Our results show some moderating roles of the perceived spousal social support, household income, and mother’s education on the association between the four explanatory variables (bargaining power, sense of control, risk tolerance, and cognitive ability) and who makes the financial decisions. The findings provide potential benefits for older couples who consult financial professionals about financial management.
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Notes
Even if total household income is controlled in our models, they do not suffer from perfect multicollinearity because total household income includes capital income and other income in addition to each spouse’s income listed above. Both capital and other incomes are reported at the household level, and thus we cannot identify which spouse earns this income. Capital income is the sum of household business or farm income, self-employment earnings, business income, gross rent, dividend and interest income, trust funds or royalties, and other asset income. Other income consists of alimony and lump sums from insurance, pension, and inheritance. The variance inflation factors (VIF) for each spouse’s percentage contribution and logarithm of household income were close to 1 (1.38 for both the husband’s and wife’s contributions and 1 for household income), suggesting that multicollinearity is unlikely to be an issue.
The summary statistics of our sample and those who completed the LB section are almost identical. The summary table is available upon request.
We did not use a continuous variable of household income because the distribution of the variable is highly skewed to the right-hand side. If we take a logarithm transformation to deal with the distribution of the variable and interact it with other variables, the interpretation of the coefficients is not straightforward. Thus, for simplicity and an intuitive interpretation of the coefficients, we categorized our sample into three groups based on tertiles.
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Lim, H., Shin, S.H., Wilmarth, M.J. et al. Who Decides? Financial Decision-Making Among Older Couples. J Fam Econ Iss 43, 310–337 (2022). https://doi.org/10.1007/s10834-021-09775-3
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DOI: https://doi.org/10.1007/s10834-021-09775-3