The Impact of Sense of Control On the Financial Strain Experienced by Older Adults

Background and Purpose: Americans face a wide-range of financial decisions as they age. To make informed financial decisions about issues such as financial entitlements, pension plans, insurance matters, investment strategies, budgeting (Hayes, 1991), and health care, Americans must take increasing control of their finances in their latter years. Early evidence indicates that older Americans, in general, and women and minorities (Lusardi & Mitchell, 2007, 2008), more specifically, are not exercising control over the financial decisions they face. As a result, they are not ensuring themselves of a financially sound retirement. This lack of control over one's financial situation has not yet caused irreparable harm. However, as Baby Boomers age and fewer workers finance the retirement of a growing Baby Boom population, older adults face increased financial risk. By focusing this research on older adults (age 50 +) and the financial strain they experience in their latter years, I explored how general and domain-specific control beliefs influence the relationship between demographic factors of older adults and financial strain.

Methods: This research consists of a cross-sectional, quantitative secondary data analysis using Health and Retirement Study (HRS), which is a panel study that began in 1992 and represents all persons over 50 in the United States. This study uses two components of the HRS, the core survey and a Psychosocial Leave-Behind Participant Lifestyle Questionnaire (LBQ) from 2006. Using the HRS to examine general sense of control and domain-specific measures of control associated with financial strain, the sample consisted of approximately 7,500 adults over the age of 50. To assess the impact of sense of control on financial strain, I utilized nested regression models.

Results: The results from nested regression models predicting financial strain highlight that gender is not a significant determinant of financial strain. The general and domain-specific sense of control of older adults significantly influenced the size and magnitudes of the linkages between their demographic factors and financial strain. In combination, general and domain-specific measures of control boosted explained variance in financial strain by 55 percent. The results suggest that increased control over work, in particular, can improve financial strain.

Conclusions and Implications: Sense of control variables are strongly influential over peoples' sense of financial strain. Because sense of control is a learned behavior, it is susceptible to interventions boosting cognitive orientation, social support processes, and goal-oriented strategies. These interventions may be instrumental to practitioners in a position to link different mechanisms to increased levels of sense of control and ultimately to decreased levels of financial strain. This study is relevant to social workers, since many may lack preparation, knowledge and skills to tackle increasingly complex financial problems that are confronting their clients. For this reason, schools of social work and continuing education programs might do well to offer courses in financial management, personal finance, and financial social work. The need for financial knowledge is likely to increase rapidly as social work schools respond to calls for increasing financial literacy, especially among financially vulnerable families.