Development and Validation of a Parsimonious Financial Well-Being Index in the Health and Retirement Study

Financial well-being (FWB) encompasses objective and subjective financial status and may influence health. We developed and validated a parsimonious FWB index using data from 23,006 Health and Retirement Study (HRS) participants aged 50 years and older from 2006 to 2022. The FWB-5 Index was derived using correlated two-factor confirmatory factor analysis accounting for household clustering. Indicators included household wealth, household income-to-poverty ratio, monthly financial strain, satisfaction with one's financial situation, and perceived financial mastery. We assessed convergent and discriminant validity using the Consumer Financial Protection Bureau Financial Well-Being (CFPB-FWB) Scale and Satisfaction with Life Scale, respectively. Associations with pre-baseline socioeconomic factors and subsequent depressive symptoms and health conditions were examined to assess construct and predictive validity. Model fit indices supported the two-factor structure (robust comparative fit index = 0.99; robust root mean square error of approximation = 0.05). Correlations were stronger with the CFPB-FWB Scale (Spearman P = 0.80) than with life satisfaction (Spearman P = 0.43). Associations with socioeconomic factors and subsequent health outcomes were in the hypothesized directions. These findings support the FWB-5 Index as a parsimonious measure for examining financial well-being and its associations with health across HRS waves, including those predating the CFPB-FWB Scale.