Recap of Rick’s Speech at the Retirement Research Consortium
Posted by Rick Miller on August 29, 2014
I recently had the privilege of attending the 2014 Retirement Research Consortium (RRC) Meeting on August 7-8, 2014 at the National Press Club in Washington, DC. I also had the honor of addressing the meeting as the luncheon speaker on Thursday the 7th. You can see the slides from my speech here, and view the video here.
This was the 16th annual meeting of the RRC, which comprises three Centers, one each at Boston College, the University of Michigan, and the National Bureau of Economic Research. The RRC’s mission is “to plan and conduct a broad research program that will develop retirement policy information to assist policymakers, the public and the media in understanding Social Security issues.”
While much of the meeting focused on technical and specific policy issues related to the Social Security program itself, several of the presentations addressed subjects of more general interest.
Most experts agree that one of the best financial decisions most retirees can make is to delay claiming Social Security until their age 70. However, only 2% of claimants do that, with 50% of Americans claiming at 62 or within 2 months of leaving the labor force, and 80% claiming before their Full Retirement Age (FRA) of 66.
Suzanne Shu from UCLA spoke about her research into whether presenting benefit information differently might encourage people to make better decisions. In general, previous work has shown that both people’s starting biases and information presentation format influence the decision.
She and her colleagues have found that Social Security claiming appears to be quite different from an annuity purchase. In particular, some people believe very strongly that they have earned their Social Security benefits, that they “own” them. We already know that people have a strong dislike of losses. In fact, people with a strong sense of ownership in their benefits are more likely to claim early, no matter how the information is presented. It seems that people with the “ownership” view are concerned that delaying their benefit start date risks losing some of their benefits. Unfortunately, there is no recommendation on how to help them overcome this bias to make a better claiming decision.
Keith Gamble of DePaul University spoke about work he is doing in cooperation with Rush University’s Memory and Aging Project. The Project annually administers a battery of cognition tests to a sample of seniors. Gamble and his colleagues made three very interesting findings:
- Seniors with steadily declining cognition are more likely to suffer from financial fraud.
- Seniors who are overconfident in their financial knowledge (that is, they score poorly on a test of financial knowledge, but believe their financial knowledge is strong) are more likely to suffer from financial fraud.
- Seniors who have suffered a financial fraud are more willing to accept financial risk (the implication being that they may have further increased susceptibility to some kinds of fraud).
Financial fraud among seniors is a very serious problem. “The 2012 Senior Financial Exploitation Study1 conducted by the Certified Financial Planner (CFP) Board of Standards, Inc., found that 56% of CFP professionals had an older client who had been financially exploited, and the average estimated loss was $50,000 per victim.” Gamble’s work gives all of us important insight into who may be at greatest risk of victimization, and perhaps how to help protect them.