What Does the Research Say and What Should Be the Priorities?

1. What Does the Research Say and What Should Be the Priorities? Presentation at the Financial Literacy Leadership Conference September 29, 2014

2. Outline • 2012 FLEC Research Priorities • Starting Early for Financial Success • Financial Empowerment Innovation Fund • USDA Grantees • National Financial Capability Study (NFCS) • SSA supported research with other FLEC members • Health and Retirement Study (HRS) • American Life Panel (ALP) • Minorities and Retirement Security

3. FY 2012 FLEC Research Priorities • FLEC consists of 22 federal agencies. The co-chairs of the Commission are the Department of Treasury and CFPB. These two agencies have the lead for coming up with the most important areas that all federal agencies may want to research that fits within their mission and will support FLEC. • The main priority that the federal government has been funding is “Employ longitudinal data to evaluate the effectiveness of core competencies on behavior and financial well-being over time.” • We have copies in the back but you can also find them at: http://www.treasury.gov/resource-center/financial-education/Documents/2012%20Research%20Priorities%20-%20May%2012.pdf

4. Starting Early for Financial Success • This is a new focus for the federal government but the Department of Education and Treasury have been working on this area of research. • We have copies of the document in the back, but it can also be found at: http://www.treasury.gov/resource-center/financial-education/Documents/Starting%20Early%20Research%20Priorities%20May%202013.pdf

5. Financial Empowerment Innovation Fund • The Financial Empowerment Innovation Fund is designed to support the development and evaluation of new strategies to promote financial access and financial capability. • In FY 2014, Treasury seeks to award up to approximately $6 million in support of research contracts that test and evaluate promising practices in three main focus areas… See press release at: http://www.treasury.gov/resource-center/financial-education/Pages/Finemp.aspx

6. Financial Empowerment Innovation Fund • Payments – Treasury is looking to support the development of cutting edge strategies that use the disbursement of payments–particularly government payments–as a vehicle to: • Increase access to mainstream financial services; • Facilitate personal savings; and • Promote effective financial decision-making by the payment recipients.

7. Financial Empowerment Innovation Fund • Higher Education Decision-Making – Treasury is looking to support the development and testing of new strategies and tools to help individuals and families navigate: • Financial decision-making around post-secondary education; • Student financial aid; and • Repaying student loans.

8. Financial Empowerment Innovation Fund • Financial Capability – Treasury is eager to identify and test new strategies for delivering effective financial education, including the use of new technology and personalized interactions. • Potential projects might include: • Evaluating mobile based financial decision making tools that help families track and manage their spending and budget; • Leveraging volunteers and/or professionals to provide lower-income families with personalized financial guidance to help them save; and • Summer youth employment programs that provide money management skills training for young adults.

9. USDA Multistate Grant • USDA awarded a five-year grant in October 2013 entitled “Behavioral economics and financial decision-making and information management across the lifespan.” • USDA support will allow the grantees to study • Student loan decision-making • How consumers process information and make decisions regarding housing (rent vs. buy & mortgage) • Social Security retirement claiming decisions • Currently the grantee is working on student-loan decision-making.

10. National Financial Capability Study • The FINRA Foundation has sponsored two waves of the National Financial Capability Study (2009 and 2012) in consultation with several federal agencies and the President’s Advisory Council on Financial Capability. • The survey has about 100 questions and is administered to approximately 25,000 participants to provide state-by-state and national comparisons. There is also a smaller militarysurvey.

11. National Financial Capability Study • The FINRA Foundation will administer the 2015 wave of the NFCS in late 2015 with findings released in mid 2016. • The FINRA foundation has an advisory board that contains many members of the FLEC research community. • More information about this important survey can be found at http://www.usfinancialcapability.org/

12. Health and Retirement Study • A longitudinal survey of approximately 26,000 individuals that began in 1992. The panel members are re-administered the survey instrument every two years. • The main topic areas of the survey are: • Health • Work and Retirement • Income and Wealth • Family Characteristics and Intergenerational Transfers • There are two versions of the survey (public and restricted). The restricted version has been matched to SSA and IRS records.

13. Health and Retirement Study • There is also a RAND HRS version that some researchers have found easier to use than the unmatched data. • Many researchers that have been funded under SSA’s Retirement Research Consortium have used the HRS to produce working papers. • The Lusardi/Mitchell three financial literacy questions have been administered to panel members since at least 2004. • If you would like to learn more about the HRS you can at http://hrsonline.isr.umich.edu/index.php?p=dbook.

14. American Life Panel • The American Life Panel is an innovative internet panel that was originally funded by HHS about ten years ago to test if the HRS could be successfully administered at least partially using the internet mode. • All panel members are administered the Core HRS every two years. • Some panel members have already been administered the CORE HRS instrument twice and starting next fiscal year they will be administered the instrument for the third time.

15. American Life Panel • At this time panel members have been administered approximately 400 surveys. Since every panel member has a unique ID#, any of the surveys that panel members have taken can be merged with any other survey into one dataset. • The original panel had about 3,000 members. Those panel members had a little higher income than the general population. • HHS and SSA support will allow the sample to grow to approximately 9,000 panel members in the near future.

16. American Life Panel • Some of the interesting populations added to the panel with SSA support were: • 2,000 low-income individuals that included 1,000 bilingual Spanish speakers. • Approximately 200 of the bilingual speakers prefer to be administered surveys in Spanish. • 300 Native Americans • Since the grantee is using mailing addresses and some Tribal lands have infrastructure problems, we suspect that most of the sample will be living in non-Tribal areas. • 1,000 nationally representative new panel members that will be administered a financial literacy scale.

17. American Life Panel • Some interesting studies that have also been fielded using the ALP are: • The FINRA Foundation administered the second version of the NFCS to 2,000 panel members. • The FRB administered the Older Americans Survey (40 and older) to panel members. • The Financial Crisis Survey was administered for a number of years to help assess the affect of the Great Recession on individual’s retirement security.

18. American Life Panel • Some interesting findings from research using the ALP: • Minorities are more likely to close bank accounts because of high minimum balances. • Providing different framing for the claiming decision can change the age at which individuals intend to claim Social Security retirement benefits. • Tailoring financial education information to the specific conditions and needs of the target population can enhance its effectiveness, but the effects are mostly temporary and not accompanied by behavior change. • Financially literate borrowers, who are better able to calculate the benefits of a strategic default, are more likely to walk away from an underwater home (“strategic default”). • Uncertainty about longevity may be one of the reasons why individuals do not purchase annuities. • Health literacy may partly explain why the more educated are healthier.

19. Minorities and Retirement Security (MRS) Program Grants • The Department of Education with support from the Social Security Administration awarded four grants to HBCUs/MSIs to increase the number of new minority scholars in the area of financial capability and retirement security research. • The four grants were to FAMU, Hampton, University of Houston-Downtown and Chicago State. • The grants are for up to five years and the Department of Education will be awarding continuation grants for the second year in the near future.

20. Contact Information David Rogofsky SSA David.Rogofsky@ssa.gov 202-358-6209