Putting Behavioral Finance to Work: Insights and Solutions for Better Retirement Outcomes
2019 TIAA Institute Fellows Symposium
The TIAA Institute and the Pension Research Council/Boettner Center at Wharton School of the University of Pennsylvania co-hosted a research forum that focused on how common behavioral factors and biases affect retirement planning and financial decisions. These groundbreaking studies use principles of behavioral economics to examine how Americans make retirement-related decisions.
Date: June 19, 2019
Location: TIAA Headquarters, New York, NY
During the course of the day, we heard research presentations on the following studies:
Speaker: Joseph Kable, University of Pennsylvania
■ Memory ability in older adults is associated with temporal discounting, even when controlling for age, gender and years of education.
■ People with mild cognitive impairment discount future outcomes to a greater degree than cognitively normal individuals.
■ Executive function (e.g., the ability to keep rules in mind during a task) is not associated with temporal discounting, but is associated with ability to maximize expected value in risky choices.
Speaker: Bill Skimmyhorn, William & Mary
■ There has been significant compliance with the regulation, which specified that employees hired before 1984 would remain in CSRS, while those hired subsequently would be enrolled in FERS.
■ Besides pension plan enrollment, other employee characteristics do not change sharply at the 1984 threshold.
■ Very few employees opted in to FERS during the initial open season in 1987; instead, they elected to stay with the traditional CSRS pension.
■ FERS coverage reduced consumer indebtedness by more than $11,000 in the long run, primarily via less mortgage debt.
■ FERS coverage had little effect on consumer credit scores.
Speaker: Federico Echenique, California Institute of Technology
■ The vast majority of subjects do not conform with SEU theory.
■ Subjects exhibit similar responses to uncertainty generated by simulated low- and high-volatility stock prices.
■ The degree of compliance with the theory is very similar for undergraduate students, younger adults (20-39), middle-aged adults (40-59) and older subjects (60 or older).
■ Subjects with a high degree of financial literacy behave significantly closer to the theory, based on one of two financial literacy measures tested; but there is no significant relation with the second measure.
■ Subjects with more education are significantly closer to theory than less-educated subjects.
Speaker: Annamaria Lusardi, The George Washington University, TIAA Institute Fellow
Speaker: Julie Agnew, William & Mary, TIAA Institute Fellow
Speaker: David P. Richardson, TIAA Institute