Gordon L. Clark, Kendra Strauss, and Janelle Knox-Hayes
- Published in print:
- 2012
- Published Online:
- May 2012
- ISBN:
- 9780199600854
- eISBN:
- 9780191738104
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199600854.003.0001
- Subject:
- Business and Management, Pensions and Pension Management, Political Economy
Occupational pensions are a relatively recent innovation, but their history is well documented. We begin the book with the issue of why occupational pension systems came into being, what their ...
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Occupational pensions are a relatively recent innovation, but their history is well documented. We begin the book with the issue of why occupational pension systems came into being, what their current purpose is, and whether they meet the (relatively modest) goals as set out in many governments’ policy manifestos. This forms the backdrop for our critical examination of financial decision-making, and in particular saving for retirement. We emphasize the importance of risk, uncertainty, and scale in navigating financial markets awash with information. Individuals vary in their level of sophistication of financial knowledge and risk decision-making, and use a range of techniques from financial calculation to reliance on peers to intuition. How individual choice is exercised through financial decision-making in the context of culture and emotion is not very well understood. Given the significance of financial information and knowledge for well-being and the absence or thorough investigation in the literature, we introduce a considerable research program which investigates the core questions that underpin individual decision-making. In particular, we use econometric methods to demonstrate the significance of the socio-demographic attributes of people in risk-related decision-making.Less
Occupational pensions are a relatively recent innovation, but their history is well documented. We begin the book with the issue of why occupational pension systems came into being, what their current purpose is, and whether they meet the (relatively modest) goals as set out in many governments’ policy manifestos. This forms the backdrop for our critical examination of financial decision-making, and in particular saving for retirement. We emphasize the importance of risk, uncertainty, and scale in navigating financial markets awash with information. Individuals vary in their level of sophistication of financial knowledge and risk decision-making, and use a range of techniques from financial calculation to reliance on peers to intuition. How individual choice is exercised through financial decision-making in the context of culture and emotion is not very well understood. Given the significance of financial information and knowledge for well-being and the absence or thorough investigation in the literature, we introduce a considerable research program which investigates the core questions that underpin individual decision-making. In particular, we use econometric methods to demonstrate the significance of the socio-demographic attributes of people in risk-related decision-making.
Annamaria Lusardi and Olivia S. Mitchell
- Published in print:
- 2011
- Published Online:
- January 2012
- ISBN:
- 9780199696819
- eISBN:
- 9780191732089
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199696819.003.0001
- Subject:
- Business and Management, Pensions and Pension Management, Finance, Accounting, and Banking
As the world becomes more financially integrated and complex, average individuals and their families are increasingly faced with making highly sophisticated and all-too-often irreversible financial ...
More
As the world becomes more financially integrated and complex, average individuals and their families are increasingly faced with making highly sophisticated and all-too-often irreversible financial decisions. Nowhere is this more evident than with regard to retirement decision-making. Indeed, the global financial crisis suggests that poor financial decision-making can have substantial costs not only for individuals but also society at large. This volume focuses on key lessons for financial decision-making in the wake of that crisis, exploring how financial literacy can enhance peoples' skills and abilities to make more informed economic choices.Less
As the world becomes more financially integrated and complex, average individuals and their families are increasingly faced with making highly sophisticated and all-too-often irreversible financial decisions. Nowhere is this more evident than with regard to retirement decision-making. Indeed, the global financial crisis suggests that poor financial decision-making can have substantial costs not only for individuals but also society at large. This volume focuses on key lessons for financial decision-making in the wake of that crisis, exploring how financial literacy can enhance peoples' skills and abilities to make more informed economic choices.
Phaedra Daipha
- Published in print:
- 2015
- Published Online:
- May 2016
- ISBN:
- 9780226298542
- eISBN:
- 9780226298719
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226298719.003.0008
- Subject:
- Sociology, Science, Technology and Environment
The book’s last chapter provides a more systematic presentation of the call for a sociology of decision-making in three interrelated ways. First, it formulates and schematically articulates how the ...
More
The book’s last chapter provides a more systematic presentation of the call for a sociology of decision-making in three interrelated ways. First, it formulates and schematically articulates how the main analytic components featured in the earlier, empirical chapters become entangled during the process of decision-making. Second, it theoretically elaborates this proposed conceptual framework of the decision-making process along three analytically distinct dimensions: practice, temporality, and risk. And third, by drawing on the extant literature on medical decision-making and financial decision-making respectively, it provides some external validity for the proposed framework and extends it along two additional analytic dimensions: intervention and performativity.Less
The book’s last chapter provides a more systematic presentation of the call for a sociology of decision-making in three interrelated ways. First, it formulates and schematically articulates how the main analytic components featured in the earlier, empirical chapters become entangled during the process of decision-making. Second, it theoretically elaborates this proposed conceptual framework of the decision-making process along three analytically distinct dimensions: practice, temporality, and risk. And third, by drawing on the extant literature on medical decision-making and financial decision-making respectively, it provides some external validity for the proposed framework and extends it along two additional analytic dimensions: intervention and performativity.
Gordon L. Clark, Kendra Strauss, and Janelle Knox-Hayes
- Published in print:
- 2012
- Published Online:
- May 2012
- ISBN:
- 9780199600854
- eISBN:
- 9780191738104
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199600854.001.0001
- Subject:
- Business and Management, Pensions and Pension Management, Political Economy
Understanding the ways in which people save for their retirement is an urgent issue. So much has changed in the last 10 to 15 years, especially in the area of the provision of pensions and retirement ...
More
Understanding the ways in which people save for their retirement is an urgent issue. So much has changed in the last 10 to 15 years, especially in the area of the provision of pensions and retirement income. Around the world, greater and greater responsibility is being allocated to individuals while governments discount their contributions to social security and employers retreat from the provision of supplementary retirement income. In this book, we begin with the behavioral revolution and its implications for understanding financial decision-making and saving for the future. Recognizing the profound implications of this research program, we go beyond issues of risk aversion, framing, and decision-making to consider how social identity and the resources due to people by virtue of their place in society figure in savings behavior. We take seriously the context of environment in which people make financial decisions arguing that this allows us to better understand the coexistence of sophistication and naivety apparent in patterns of retirement saving. Utilizing databases from the United Kingdom, we give empirical life to our theoretical arguments demonstrating how an integrated approach to individual financial decision-making is necessary if we are to address the apparent shortfall in many people’s planning for the future. The book concludes by setting the agenda for the design, governance, and regulation of pension savings schemes consistent with delivering cost-effective solutions to pension adequacy. In these ways, our book is a manifesto for rethinking individual behavior as well as the design of retirement income systems.Less
Understanding the ways in which people save for their retirement is an urgent issue. So much has changed in the last 10 to 15 years, especially in the area of the provision of pensions and retirement income. Around the world, greater and greater responsibility is being allocated to individuals while governments discount their contributions to social security and employers retreat from the provision of supplementary retirement income. In this book, we begin with the behavioral revolution and its implications for understanding financial decision-making and saving for the future. Recognizing the profound implications of this research program, we go beyond issues of risk aversion, framing, and decision-making to consider how social identity and the resources due to people by virtue of their place in society figure in savings behavior. We take seriously the context of environment in which people make financial decisions arguing that this allows us to better understand the coexistence of sophistication and naivety apparent in patterns of retirement saving. Utilizing databases from the United Kingdom, we give empirical life to our theoretical arguments demonstrating how an integrated approach to individual financial decision-making is necessary if we are to address the apparent shortfall in many people’s planning for the future. The book concludes by setting the agenda for the design, governance, and regulation of pension savings schemes consistent with delivering cost-effective solutions to pension adequacy. In these ways, our book is a manifesto for rethinking individual behavior as well as the design of retirement income systems.
Olivia S. Mitchell and Annamaria Lusardi (eds)
- Published in print:
- 2011
- Published Online:
- January 2012
- ISBN:
- 9780199696819
- eISBN:
- 9780191732089
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199696819.001.0001
- Subject:
- Business and Management, Pensions and Pension Management, Finance, Accounting, and Banking
As financial markets become increasingly complex and integrated, individuals and their families are increasingly faced with making highly sophisticated and all-too-often irreversible economic ...
More
As financial markets become increasingly complex and integrated, individuals and their families are increasingly faced with making highly sophisticated and all-too-often irreversible economic decisions. Nowhere is this more evident than with regard to retirement decision-making: a half-century ago, traditional defined benefit pension schemes were the norm in the United States, Japan, Australia and much of Europe, but these have now been largely replaced with defined contribution pensions. In the process, employer and government judgment regarding how much to save and where to invest has been replaced by individuals having to make these choices on their own (perhaps assisted by advisers they also select on their own). Additionally, participants in defined contribution plans must also decide how to spend down their pension assets and determine whether to annuitize or take their benefits in a single lump sum. The trend toward increased individual responsibility and greater financial complexity extends into other realms of life as well, for example regarding decisions over credit cards, adjustable rate mortgages, and when to claim retirement benefits. This volume focuses on key lessons for financial decision-making in the wake of that crisis, exploring how financial literacy can enhance peoples' skills and abilities to make more informed economic choices. Moreover, given the demographic forces at work and the structure of the labor markets, where workers change jobs and employers many times before retiring, the increase in individual responsibility with regard to financial security after retirement will continue to be a feature of many economies around the world.Less
As financial markets become increasingly complex and integrated, individuals and their families are increasingly faced with making highly sophisticated and all-too-often irreversible economic decisions. Nowhere is this more evident than with regard to retirement decision-making: a half-century ago, traditional defined benefit pension schemes were the norm in the United States, Japan, Australia and much of Europe, but these have now been largely replaced with defined contribution pensions. In the process, employer and government judgment regarding how much to save and where to invest has been replaced by individuals having to make these choices on their own (perhaps assisted by advisers they also select on their own). Additionally, participants in defined contribution plans must also decide how to spend down their pension assets and determine whether to annuitize or take their benefits in a single lump sum. The trend toward increased individual responsibility and greater financial complexity extends into other realms of life as well, for example regarding decisions over credit cards, adjustable rate mortgages, and when to claim retirement benefits. This volume focuses on key lessons for financial decision-making in the wake of that crisis, exploring how financial literacy can enhance peoples' skills and abilities to make more informed economic choices. Moreover, given the demographic forces at work and the structure of the labor markets, where workers change jobs and employers many times before retiring, the increase in individual responsibility with regard to financial security after retirement will continue to be a feature of many economies around the world.
Keith Jacks Gamble
- Published in print:
- 2017
- Published Online:
- November 2017
- ISBN:
- 9780198808039
- eISBN:
- 9780191847165
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198808039.003.0003
- Subject:
- Business and Management, Pensions and Pension Management, Finance, Accounting, and Banking
Increased longevity has brought about financial challenges for which many seniors and their families are unprepared. This chapter describes recent research findings on financial decision making at ...
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Increased longevity has brought about financial challenges for which many seniors and their families are unprepared. This chapter describes recent research findings on financial decision making at older ages enabled by the Rush Memory and Aging Project, a large cohort study of aging. Although financial experience increases with age, financial decision making capabilities tend to diminish due to declines in cognitive ability. Declines in cognition coincide with diminished financial literacy and declining self-confidence. Older adults who experience cognitive decline often have difficulties managing their money and are more likely to get help with their financial decisions. Older adults are frequently targeted by scammers. Declining cognition is a significant risk factor for becoming a victim of financial fraud. Seniors who are over-confident in their financial knowledge are more likely to be victimized.Less
Increased longevity has brought about financial challenges for which many seniors and their families are unprepared. This chapter describes recent research findings on financial decision making at older ages enabled by the Rush Memory and Aging Project, a large cohort study of aging. Although financial experience increases with age, financial decision making capabilities tend to diminish due to declines in cognitive ability. Declines in cognition coincide with diminished financial literacy and declining self-confidence. Older adults who experience cognitive decline often have difficulties managing their money and are more likely to get help with their financial decisions. Older adults are frequently targeted by scammers. Declining cognition is a significant risk factor for becoming a victim of financial fraud. Seniors who are over-confident in their financial knowledge are more likely to be victimized.
Brett Hammond, Olivia S. Mitchell, and Stephen P. Utkus
- Published in print:
- 2017
- Published Online:
- November 2017
- ISBN:
- 9780198808039
- eISBN:
- 9780191847165
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198808039.003.0001
- Subject:
- Business and Management, Pensions and Pension Management, Finance, Accounting, and Banking
By the end of the next decade, the number of older Americans will have grown rapidly, but half if not more of the elderly will suffer from cognitive deficits after the age of 80. This volume explores ...
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By the end of the next decade, the number of older Americans will have grown rapidly, but half if not more of the elderly will suffer from cognitive deficits after the age of 80. This volume explores how financial decision making changes at older ages, how and when financial advice can be useful for the older population, and what solutions and opportunities are needed to resolve the likely problems that will arise.Less
By the end of the next decade, the number of older Americans will have grown rapidly, but half if not more of the elderly will suffer from cognitive deficits after the age of 80. This volume explores how financial decision making changes at older ages, how and when financial advice can be useful for the older population, and what solutions and opportunities are needed to resolve the likely problems that will arise.
Olivia S. Mitchell, P. Brett Hammond, and Stephen P. Utkus (eds)
- Published in print:
- 2017
- Published Online:
- November 2017
- ISBN:
- 9780198808039
- eISBN:
- 9780191847165
- Item type:
- book
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/oso/9780198808039.001.0001
- Subject:
- Business and Management, Pensions and Pension Management, Finance, Accounting, and Banking
As the world’s population lives longer, it will become increasingly important for plan sponsors, retirement advisors, regulators, and financial firms to focus closely on how older persons fare in the ...
More
As the world’s population lives longer, it will become increasingly important for plan sponsors, retirement advisors, regulators, and financial firms to focus closely on how older persons fare in the face of rising difficulties with cognition and financial management. This book offers state-of-the-art research and recommendations on how to evaluate when older persons need financial advice, help them make better financial decisions, and to identify policy options for handling these individual and social challenges efficiently and fairly. This latest volume in the Pension Research Council series draws lessons from theory and practice, and will be of interest to employees and retirees, consumers and researchers, and financial institutions working to design better retirement plan offerings.Less
As the world’s population lives longer, it will become increasingly important for plan sponsors, retirement advisors, regulators, and financial firms to focus closely on how older persons fare in the face of rising difficulties with cognition and financial management. This book offers state-of-the-art research and recommendations on how to evaluate when older persons need financial advice, help them make better financial decisions, and to identify policy options for handling these individual and social challenges efficiently and fairly. This latest volume in the Pension Research Council series draws lessons from theory and practice, and will be of interest to employees and retirees, consumers and researchers, and financial institutions working to design better retirement plan offerings.
Brian Knutson and Gregory R. Samanez-Larkin
- Published in print:
- 2012
- Published Online:
- January 2013
- ISBN:
- 9780199873722
- eISBN:
- 9780199980000
- Item type:
- chapter
- Publisher:
- Oxford University Press
- DOI:
- 10.1093/acprof:oso/9780199873722.003.0007
- Subject:
- Law, Company and Commercial Law
This chapter summarizes recent findings in neuroeconomics suggesting that emotion (specifically, “anticipatory affect”) can influence financial decisions. It then discusses how individual differences ...
More
This chapter summarizes recent findings in neuroeconomics suggesting that emotion (specifically, “anticipatory affect”) can influence financial decisions. It then discusses how individual differences in anticipatory affect may promote proneness to consumer debt. Thanks to improvements in spatial and temporal resolution, functional magnetic resonance imaging experiments have begun to suggest that activation of a brain region associated with anticipating gains (i.e., the nucleus accumbens or NAcc) precedes an increased tendency to seek financial gains, whereas activation of another region associated with anticipating losses (i.e., the anterior insula) precedes an increased tendency to avoid financial losses. By extension, individual differences in increased gain anticipation, decreased loss anticipation, or some combination of the two might promote proneness to debt. Ultimately, neuroeconomic advances may help individuals to optimize their investment strategies, as well as empower institutions to minimize consumer debt.Less
This chapter summarizes recent findings in neuroeconomics suggesting that emotion (specifically, “anticipatory affect”) can influence financial decisions. It then discusses how individual differences in anticipatory affect may promote proneness to consumer debt. Thanks to improvements in spatial and temporal resolution, functional magnetic resonance imaging experiments have begun to suggest that activation of a brain region associated with anticipating gains (i.e., the nucleus accumbens or NAcc) precedes an increased tendency to seek financial gains, whereas activation of another region associated with anticipating losses (i.e., the anterior insula) precedes an increased tendency to avoid financial losses. By extension, individual differences in increased gain anticipation, decreased loss anticipation, or some combination of the two might promote proneness to debt. Ultimately, neuroeconomic advances may help individuals to optimize their investment strategies, as well as empower institutions to minimize consumer debt.
