Behavioral Finance and Saving: Determinants of Retirement Readiness
2018 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 retirement security and featured innovative research on retirement plan design, financial literacy, and other topics designed to increase financial well-being for U.S. workers and employers.
Date: June 18, 2018
Location: The Kimpton Hotel, Washington, D.C.
During the course of the day, we heard keynote addresses from thought leaders in retirement planning and research presentations on the following studies:
Speaker: Karolina Lempert, University of Pennsylvania
■ People tend to prefer immediate payouts over delayed payouts, even when the delayed payout is much larger.
■ The rate at which people discount future rewards varies widely and may depend on context, but most people exhibit some degree of temporal discounting.
■ Steep temporal discounting is associated with smoking, gambling, excessive credit card borrowing and other risky behaviors.
Retrieving positive memories before making intertemporal choices does not appear to affect temporal discounting in cognitively normal older adults.
Speaker: Olivia S. Mitchell, Wharton School, University of Pennsylvania and NBER,
TIAA Institute Fellow
■ Most people overweight small probabilities and underweight higher probabilities to some degree.
■ Investors who overweight the probability of realizing extreme gains through equity exposure may prefer to hold a few individual stocks that could rise rapidly, versus investing in a broadly diversified portfolio.
■ Risk-averse investors who underweight the likelihood of generating moderate positive returns through equity investments might prefer to avoid stocks altogether.