November 2024
07Nov

How AI could help modernize pension and retirement systems

The world is going through a seismic demographic transition, as populations age and traditional workforces shrink, prompting challenges for retirement systems that need to adapt to remain resilient. AI may be able to assist, by helping individuals make better decisions about their own retirement and by helping invest retirement assets. Given the importance of retirement, embedding trust into our AI systems is essential before they are deployed to the retirement business. Lifespans and the cost of living are rising...

November 7, 2024
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October 2024
31Oct

Would a ‘lost decade’ derail your retirement plans? Not necessarily.

'If you feel like you're behind if you don't get 12%-plus returns every year, then maybe you need to re-evaluate your plan' If the U.S. stock market drifted into a "lost decade" in which returns stagnated in comparison with the stellar run of recent years, would retirees and those nearing retirement be doomed? The market has been very kind to workers' 401(k) plans in recent years. This year, the S&P 500 SPX is poised to post returns of more than 20%,...

October 31, 2024
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30Oct

What Are the Top Retirement Planning Questions Among Boomers?

Not surprisingly, “how much money will I need to retire comfortably” and “is it possible I could outlive my savings” were the top responses among Baby Boomers who were asked to select their top three “burning questions,” but another important issue was also on their minds. And that is the issue of long-term care, according to the latest findings from Northwestern Mutual’s 2024 Planning and Progress Study. Perhaps because of their proximity in age to retirement, Boomers included long-term care concerns...

October 30, 2024
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28Oct

BlackRock wants to talk about retirement. Climate, not so much

More than two years after BlackRock ran into a buzz saw of criticism from US conservatives over its advocacy for sustainable investing, the world’s largest money manager is attempting to change the subject. Chief executive Larry Fink has not used the word “climate” on an analyst call since January, and he mentioned climate, sustainability or the word green just eight times — out of 11,000 words — in his closely watched annual letter in March. These days, the $11.5tn asset...

October 28, 2024
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23Oct

U.S. retirement preparedness is lacking: Morningstar

A new study from Morningstar focused on U.S. retirement readiness illustrates that while there has been some improvement over time, general retirement preparedness is lacking. Using data from the Federal Reserve’s Survey of Consumer Finances, Morningstar researchers analyzed data from 3,442 households before projecting 1,000 possible “life paths” for each of them. The company used savings rates, withdrawal patterns, job turnover and health care expenses to reach its conclusions. The authors previously published two separate papers on their findings earlier this year. The bottom line, they say, is...

October 23, 2024
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11Oct

Rules of Thumb and Retirement Accounts

By Vanya Horneff, David A. Love & Raimond Maurer We examine the welfare costs of applying common rules of thumb for saving, investment, 401k contributions, and withdrawals in an environment that includes a realistic treatment of taxation, Social Security benefits, 401k-plan details, and uncertainty in income, longevity, and asset returns. We test the performance of commonly recommended rules, such as investing 100-minus-age percent of assets in stocks, contributing 6–10% of income to a 401k account, or withdrawing the required minimum...

October 11, 2024
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11Oct

Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice

By Aizhan Anarkulova, Scott Cederburg & Michael S. O'Doherty We challenge two central tenets of lifecycle investing: (i) investors should diversify across stocks and bonds and (ii) the young should hold more stocks than the old. An even mix of 50% domestic stocks and 50% international stocks held throughout one’s lifetime vastly outperforms age-based, stock-bond strategies in building wealth, supporting retirement consumption, preserving capital, and generating bequests. These findings are based on a lifecycle model that features dynamic processes for...

October 11, 2024
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11Oct

Patterns of Consumption and Savings around Retirement

By Arna Olafsson & Michaela Pagel This chapter analyzes how consumption, savings, and other positions on household balance sheets change around retirement. Four patterns stand out. First, many households have barely any savings and hold substantial amounts of consumer debt at the time of retirement. Second, consumption falls at retirement, possibly due to work-related expenses, bargain shopping, or because households face unexpected adverse shocks. Third, liquid savings increase at retirement. Fourth, wealth increases more over the course of retirement for...

October 11, 2024
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04Oct

Savings Goals Matter – Cognitive Constraints, Retirement Planning, and Downstream Economic Behaviors

By Zihan Ye, Thomas Post, Xiaopeng Zou & Shenglan Chen We study how cognitive constraints relate to each distinct step of the planning and execution process for retirement, that is, individuals’ propensity to plan, savings goals set, and economic outcomes (wealth accumulation and portfolio choice). We find that different cognitive constraints play distinct roles: Higher advanced financial literacy (and quantitative reasoning ability) predicts a greater propensity to plan, while higher basic financial literacy and verbal cognition predict setting higher savings...

October 4, 2024
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