9th International Pension Research Association (IPRA) Conference

Abstracts and speaker bios

Spending Trajectories after Age 65 and Implications for Economic Preparation for Retirement

Susann Rohwedder (RAND)

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Abstract: Extensive research has focused on saving for retirement and tools for accumulating retirement wealth, but less on the decumulation phase—spending down wealth post-retirement. A better understanding of older households’ spending patterns and their evolution helps in planning how much economic resources households would need to finance their consumption in retirement and the time path of when the resources would be needed. This study uses longitudinal data on household spending from a survey that is representative of the older U.S. population to estimate the trajectories of spending after age 65. Based on data spanning the period 2005-2019, real spending declined for both single and coupled households after age 65 at annual rates of about 2.0 percent and 2.7 percent, respectively. Stratification by wealth holdings observed at or closely following age 65 showed sizeable variation in spending levels by wealth quartile, but little variation in rates of change in spending. This broad decline in spending, including among the highest wealth quartile, suggests it may not be related to economic position. This view is supported by analyses of several other indicators, including older households’ own reports of economic satisfaction, changes in financial constraints and reduced enjoyment of certain types of spending at advanced ages. These findings have important implications for economic preparation for retirement, because declining spending paths translate into fewer resources needed in retirement compared to the common assumption that spending at older ages is flat or even increasing.

Bio: Susann Rohwedder is Senior Economist at RAND, Associate Director of the RAND Center for the Study of Aging, and Professor of Economics at the Pardee RAND Graduate School. She is a member of the Board of Directors of the Western Economic Association International and serves as Associate Editor of the Journal of the Economics of Ageing. She holds a Ph.D. in Economics from University College London (UK), and master’s degrees from the University of Warwick (UK) and from the Sorbonne (Paris, France).

Explaining the Valuation of Annuities and Lump Sum Options

Eduard Ponds (Tilburg University and APG)

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Bio: Eduard Ponds holds the chair of Economics of Collective Pension Plans at Tilburg University. He is expert in economics of pensions, in particular in the fields of pension funds, pension plan (re)design, risk management, actuarial aspects, intergenerational risk sharing, and classic and value-based ALM. His publications are mainly on collective pensions, in particular related to the pension fund sector in the Netherlands and elsewhere. He introduced the policy ladder as tool to define conditional indexation by Dutch pension funds as well as the method of value-based generational accounting to determine generational redistribution in case of changes in the design and funding of collective pension plans.

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

Luigi Ventura (University of Rome)

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• Research publication:

Yuji Horioka, C. and Ventura, L. (2024). Do the Retired Elderly in Europe Decumulate Their Wealth? The Importance of Bequest Motives, Precautionary Saving, Public Pensions, and Homeownership. Review of Income and Wealth.

• In the media:

The Economist: Live a little. June 1, 2024.

Abstract: We use microdata on a large number of European countries from the Survey of Health, Ageing and Retirement in Europe (SHARE) to examine the wealth accumulation (saving) behaviour of the retired elderly in Europe. 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 positive, though relatively moderate (6.6 percent over a 3-year period). These findings suggest that the Wealth Decumulation Puzzle (the tendency of the retired elderly to not decumulate their wealth or to decumulate their wealth more slowly than expected) applies in the case of Europe. Moreover, our regression results suggest that bequest motives, generous public pension systems, and the reluctance of retired elderly homeowners to sell or borrow against their owner-occupied housing are the primary explanations for the existence of the Wealth Decumulation Puzzle in Europe.

Bio: Luigi Ventura is full professor of Economics at Sapienza, University of Rome. He graduated at Sapienza, University of Rome, and subsequently earned a Master and a Ph.D. in Economics from the Catholic University of Louvain within the European Doctoral Program in Quantitative Economics. He has lectured extensively in micro and macro economics and econometrics at Sapienza and was an invited lecturer at several other academic institutions, such as the University of Southampton, the London School of Economics, and the University of Hawaii at Manoa. His research interests include the economics of risk and time, with a main focus on the analysis of risk sharing both from a micro and a macro perspective, the economics of saving, with a particular interest in the bequest and precautionary motive, the study of monetary and network aspects of trade and, more recently, the determinants of economic growth. He has extensively published in many reputed international scholarly journals, including the Review of Economics of the Household, the Review of Income and Wealth, the Journal of Applied Econometrics, Quantitative Economics, and the Journal of Economic Growth.

SESSION 2: KEYNOTE PRESENTATION

The Role of Financial Literacy, Education, and Advice in Financial and Retirement Planning Decisions

Pierre-Carl Michaud (HEC Montreal)

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• Research publications:

1. Glenzer, Franca and Michaud, Pierre-Carl and Staubli, Stefan (2023). Frames, Incentives, and Education: Effectiveness of Interventions to Delay Public Pension Claiming. National Bureau of Economic Research Working Paper.
2. d'Astous, Philippe and Gemmo, Irina and Michaud, Pierre-Carl (2022). The Quality of Financial Advice: What Influences Client Recommendations? National Bureau of Economic Research Working Paper.
3. Gemmo, Irina and Michaud, Pierre-Carl and Mitchell, Olivia S. (2023). Selection into Financial Education and Effects on Portfolio Choice. National Bureau of Economic Research Working Paper.

Abstract: As the financial landscape becomes increasingly crowded with complex decisions that households must make, there is an urgent need to better understand how financial literacy impacts these decisions. Now more than ever, we also need more evidence on what works and what does not, and how best to help households navigate their path toward a more secure future. The presentation will highlight some of the challenges researchers face when addressing these questions, both in the field and in experimental settings, through a series of applications drawing from existing research.

Bio: Pierre-Carl Michaud holds a Ph.D. in economics from Tilburg University in the Netherlands. Professor at the Department of Applied Economics at HEC Montréal, he also holds the Jacques-Parizeau Research Chair in Economic Policy and is the Scientific Director of the Retirement and Savings Institute (RSI). He is also a research associate of the NBER, fellow of NETSPAR and IZA. His research aims to understand life-cycle behaviour along several dimensions with a particular lens on the role played by financial literacy, information frictions and subjective beliefs. 

SESSION 3: TECHNOLOGY AND AI IN PENSIONS

Can ChatGPT Plan your Retirement? Generative AI and Financial Advice

Jillian Ross (MIT CSAIL)

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Abstract: We identify some of the most pressing issues facing the adoption of large language models (LLMs) in practical settings like retirement planning. We focus on three challenges facing most LLM applications: (1) domain-specific expertise, (2) an ability to tailor that expertise to a user’s unique situation, and (3) trust, ethics, and fiduciary duty. For concreteness, we focus on the narrow context of financial advice, which serves as an ideal test bed both for determining the possible shortcomings of current LLMs and for exploring ways to overcome them. 

Bio: Jillian Ross is a senior PhD student at the MIT Computer Science and Artificial Intelligence Laboratory (CSAIL) in Cambridge, MA, USA. Her research focuses on the economic alignment of large language models in financial markets and society at large. At MIT, she is advised by Professor Andrew W. Lo at the Laboratory of Financial Engineering. Her research is supported by the MIT Presidential Fellowship and the Mathworks Engineering Fellowship.

Human-Robot Interactions in Investment Decisions

Marie Brière (Amundi Investment Institute, Université Libre de Bruxelles & Paris Dauphine PSL University)

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Bio: I am Head of Investor Intelligence & Academic Partnerships at AMUNDI Institute in Paris. I conduct research on investment, with a particular focus on sustainable finance, investors behaviour and preferences, the impact of fintechs and new technologies. I advise the strategic decisions of institutional investors and the design of investment solutions for individual investors. Since 2022, I am the Chairman of the Institute for Quantitative Investment Research (Inquire Europe), an organization supporting the development of quantitative solutions in investment, and gathering about 80 institutional investors, investment managers, banks, brokers, and consulting firms. I am also the Scientific Director of the Finance and Insurance Reloaded (FaiR) program of Institut Louis Bachelier, and the chairman of the Scientific Committee of the European Savings Observatory.

Whose Algorithm Says So: The Relationships Between Type of Firm, Perceptions of Trust and Expertise, and the Acceptance of Financial Robo-Advice

Carlos J.S. Lourenço (ISEG, University of Lisbon)

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• Research publications:

1. Lourenço, C. J. S., Dellaert, B. G. C., & Donkers, B. (2020). Whose Algorithm Says So: The Relationships between Type of Firm, Perceptions of Trust and Expertise, and the Acceptance of Financial Robo-Advice. Journal of Interactive Marketing.
2. Baker, T., Dellaert, B.G.C. (2017): Regulating Robo Advice Across the Financial Services Industry. Iowa Law Review. 

Abstract: Financial advisors are increasingly offering to accurately measure individuals’ risk preferences and provide personalized investment advice by means of automated online technologies. Little is known, however, about what drives individuals’ acceptance of such automated financial advice, and, from a consumer point of view, which firms may be best positioned to provide such advice. We generate novel insights on these questions by conducting a real-world empirical study using an interactive automated online tool that employs an innovative computer algorithm to build pension investment profiles, the “Pension Builder,” and a large, representative sample. In so doing, we focus on two key firm characteristics expected to have an impact on consumer acceptance of automated pension investment advice: profit orientation and role in the sales channel. We find that (a) the for-profit vs. not-for-profit orientation and (b) the product provider vs. advisor only role in the sales channel of the firm providing the advice, have a sequentially mediated effect on advice acceptance, that is, through the consumers’ perceptions of trust and expertise of the firm providing the automated advice. We discuss the implications of our findings for practitioners and policy makers and provide suggestions for future research.

Bio: Carlos Lourenço joined ISEG as an Assistant Professor in 2017 and he's tenured since 2023. Prior to his appointment at ISEG, Lourenço was an Assistant Professor at University of South Carolina and, before that, at Erasmus University. At Erasmus University's Rotterdam School of Management, he was the Academic Director of the Marketing Management MSc program for four years. Having started his academic career at ISCTE in Lisbon in 2003, he also taught summer schools in applied econometrics at Università della Calabria and at Universidade de São Paulo. Carlos Lourenço conducts research in mainly behavioural economics, behavioural consumer finance, and behavioural pricing and retailing. Together with his co-authors, he has been publishing in leading double-blind peer-reviewed international journals such as the Journal of Marketing Research (JMR), the International Journal of Research in Marketing (IJRM), the Journal of Interactive Marketing (JIM), the Psychology & Marketing (P&M), and the Industrial Marketing Management (IMM). Carlos Lourenço holds a BSc in Economics from Catholic University in Lisbon, which included an exchange semester at Bocconi University, and a MPhil and a PhD in Marketing, both from Tilburg University. His PhD dissertation won the Best European PhD Dissertation in Marketing EMAC McKinsey Award in 2011. He has two children and enjoys spending time with his family.

SESSION 4: SUPPORTING DECISIONS IN RETIREMENT

The Impact of Information Architecture on Retirement Savings Decumulation

Susan Thorp (The University of Sydney Business School and CEPAR)

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Abstract: Retirement income systems need to provide appropriate incentives for adequate and sustainable self-provision after working life. A clear impediment to achieving these goals is the fact that many participants in defined contribution plans tend to spend too little while retired. Plan managers and regulators need tested communication strategies to raise retirees’ financial well-being by boosting their understanding of feasible draw down patterns. In this study, we conduct three rounds of lab-in-the-field experiments to improve understanding of the conceptual and behavioural hurdles that impede sound, long-term planning for decumulation. We show that income projections induce higher rates of decumulation, but this influence is dominated by income anchors. Information provision by funds that sets higher income anchors justified by external standards are likely to induce higher rates of decumulation.

Bio: Susan Thorp is Professor of Finance at the University of Sydney Business School. Her research focuses on consumer financial decision making, especially as it relates to retirement planning. Her research has been published in leading international academic journals including Management Science, the Review of Finance, and the Economic Journal. Additionally, she has won nationally competitive research grants amounting to over four million dollars in public and industry funding. She was a founding director of Super Consumers Australia, the first independent consumer advocacy organisation for Australian pension fund members. Prof Thorp is on the Steering Committee of the Mercer CFA Institute Global Pensions Index, the Research Committee of the OECD/International Network on Financial Education and the Australian Securities and Investments Commission Consultative Panel.

Are Retirement Planning Tools Substitutes or Complements to Financial Capability?

Gopi Shah Goda (Stanford University)

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• Research publication: 

Gopi Shah Goda, Matthew R. Levy, Colleen Flaherty Manchester, Aaron Sojourner, Joshua Tasoff, Jiusi Xiao (2023). Are retirement planning tools substitutes or complements to financial capability? Journal of Economic Behavior & Organization.

Bio: Gopi Shah Goda is a Senior Fellow at the Stanford Institute for Economic Policy Research (SIEPR) and Professor, by courtesy, of Economics and of Health Policy at Stanford University. Gopi served as a senior economist at the White House Council of Economic Advisers from July 2021 to July 2022. She is also a Faculty Research Fellow at the National Bureau of Economic Research, a Fellow of the Society of Actuaries, and served as SIEPR's Deputy Director from September 2016 to July 2021. Gopi’s research focuses on the well-being of individuals as they age, the sustainability of public programs serving elderly and vulnerable populations, and the broader implications of the COVID-19 pandemic on health and labour supply. Her recent research studies examine the effects of long-term care insurance on family members’ work and location decisions, and how COVID-19 illness affects U.S. workers. Her work has appeared in a variety of leading economics journals and has and has garnered coverage in major media outlets such as the Wall Street Journal, the New York Times, the Washington Post, National Public Radio, the Guardian, and the San Francisco Chronicle. Gopi's research has been supported by the Social Security Administration, the National Institutes on Aging, the Alfred P. Sloan Foundation, and the TIAA Institute. Prior to joining SIEPR, Gopi was a Robert Wood Johnson Scholar in Health Policy Research at Harvard University. She earned her PhD in economics from Stanford University in 2007 and her B.S. in mathematics and actuarial science from the University of Nebraska-Lincoln in 2000.

Work Less But Stay Longer - Mature Worker Response to a Flexibility Reform

Trond Vigtel (Statistics Norway)

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Abstract: Many consider that reducing the eligibility age for pension benefits will discourage labor supply among mature workers. This paper analyzes a recent Norwegian pension reform that lowered the eligibility age for retirement from 67 to 62 for a group of workers, and we find that this might not necessarily be true. For these workers, the expected present value of benefits was held constant by introducing flexible claiming and actuarially adjusting the periodic pension payments. This provides us with a unique opportunity to isolate the impact of increased flexibility on labor supply. We employ a non-linear event-study approach, which allows us to study both the intensive and extensive margins of labor supply response. From ages 62 to 66, the reform leads to an average decrease of roughly 0.3 percent in aggregate annual earnings, but with an increase in the extensive-margin labor supply and reduced inflow to disability. Our findings thus suggest that increased pension flexibility could promote a gradual exit from the labor market, allowing for improved individual choice and positive welfare effects. It could also be an important component of broader pension reform.

Enquiries: 

For media enquiries, please email cepar@unsw.edu.au.