September 2022
30Sep

Nudges and Networks: How to Use Behavioural Economics to Improve the Life Cycle Savings-Consumption Balance

By David Blake Many people find it difficult to start and maintain a retirement savings plan. We show how nudges can be used both to encourage people to save enough to provide an acceptable standard of living in retirement and to draw down their accumulated pension fund to maximize retirement spending, without the risk of either running out of money or leaving unintended bequests. Networks can help too, particularly employer-based networks. However, the nudges and networks are more likely to...

September 30, 2022
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30Sep

Behavioral Influences on Retirement Planning: Non-Financial Reasoning Affecting Retirement Outcomes

By Janet Aschkenasy The supposed rational logic of the market is no longer understood to exclusively motivate economic decision making. Behavioral economics is now a vital part of university curriculums. Both lay persons and professional retirement investors at times manage money on irrational behavioral factors. Janet Aschkenasy, a veteran business writer, discusses the insights of leading behavioral economics scholars and draws upon current research to describe "decision making" practices among individuals and retirement managers. Often higher investment returns are forfeited to a behavioral...

September 30, 2022
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30Sep

Do the Retired Elderly in Europe Decumulate Their Wealth? The Importance of Bequest Motives, Precautionary Saving, Public Pensions, and Homeownership

By Charles Yuji Horioka & Luigi Ventura In this paper, we use micro data on a large number of European countries from the Survey of Health, Ageing and Retirement in Europe (SHARE) to examine the wealth accumulation (saving) behavior of the retired elderly in Europe. To summarize our main findings, we find that less than half of the retired elderly in Europe are decumulating their wealth and that the average wealth accumulation rate of the retired elderly in Europe is...

September 30, 2022
Adequacy, Articles, Savings, , ,
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14Sep

Financial Wellness Meets Behavioral Economics

By Shlomo Benartzi Helping Participants See the Big Picture and Act on It The financial lives of American workers have become increasingly complicated in the 21st century. Instead of relying on an employer pension, most workers now save on their own, a shift that brings both opportunities and challenges. In addition, workers have to effectively allocate these savings across different financial products and accounts. Should they fund their 401(k) account or emergency savings account? Should they choose a high-deductible health...

September 14, 2022
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14Sep

Choice Overload? Participation and Asset Allocation in French Employer-Sponsored Saving Plans

By Marie Briere, James M. Poterba & Ariane Szafarz This paper employs administrative data from one of the largest plan providers in France to investigate the role of plan and default characteristics in affecting whether employees participate in the plan and whether they accept its default investment option. The dataset includes information on the saving choices of 680,392 active employees at 1,610 firms. French employers have wide discretion in structuring employee saving plans. All plans must offer medium-term investments, which...

September 14, 2022
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09Sep

Are Retirement Planning Tools Substitutes or Complements to Financial Capability?

By Gopi Shah Goda, Matthew Levy, Colleen Flaherty Manchester, Aaron Sojourner, Joshua Tasoff, Jiusi Xiao We conducted a randomized controlled trial to understand how a web-based retirement saving calculator affects workers’ retirement-savings decisions. In both conditions, the calculator projected workers’ retirement income goal. In the treatment condition, it additionally projected retirement income based on defined-contribution savings, prominently displayed the gap between projected goal and actual retirement income, and allowed users to interactively explore how alternative, future contribution choices would affect...

September 9, 2022
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09Sep

The Impact of Health on Wealth: Empirical Evidence

By Umesh Ghimire This paper empirically evaluates the impact of health on wealth among adults between the ages of 50 and 100 in the United States. Using the frailty index to measure health status and carefully accounting for the dynamic relationship between frailty and wealth, I find that suffering one more health deficit leads, on average, to approximately 2.23 percent decline in the net worth of American households. The impact is concentrated among individuals over the age of 70, in...

September 9, 2022
Aging, Articles, Savings, , ,
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09Sep

Spending Elasticity and Optimal Portfolio Risk Levels

By David Blanchett, Jeremy Stempien Research on optimal retirement strategies overwhelmingly assumes that the retirement income goal is effectively inelastic (or fixed), which implies the retiree household has neither the desire nor the ability to cut back on spending for the entire duration of retirement (which is often assumed to last 30+ years). This is an incredibly unrealistic assumption that has significant implications on a myriad of retirement decisions. This piece focuses on how spending elasticity impacts optimal portfolio risk...

September 9, 2022
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02Sep

How Gloomy is the Retirement Outlook for Millennials?

By Karen Smith, Richard W. Johnson Social, economic, demographic, and public policy shifts have made Millennial retirement security a pressing concern. Many recent trends threaten financial security for future generations of retirees. Male labor force participation pre-age 55 has slumped, men’s median earnings have stagnated, marriage and homeownership rates are falling, debt levels remain high, and out-of-pocket spending on medical and long-term services and supports are rising. Other trends are more encouraging, such as women’s higher earnings, the rise in...

September 2, 2022
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August 2022
19Aug

A Game-Theoretic Model of the Consumer Behavior under Pay-What-You-Want Pricing Strategy

By Vahid Ashrafimoghari & Jordan W. Suchow In a digital age where companies face rapid changes in technology, consumer trends, and business environments, there is a critical need for continual revision of the business model in response to disruptive innovation. A pillar of innovation in business practices is the adoption of novel pricing schemes, such as Pay-What-You-Want (PWYW). In this paper, we employed game theory and behavioral economics to model consumers’ behavior in response to a PWYW pricing strategy where...

August 19, 2022
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