Some Novel Ideas for Improving Retirement Income

Aug 11, 2010

By Jennifer Saranow Schultz Originally published in the New York Times on
May 20, 2010 Employees have increasingly been forced over the last few decades to take responsibility for ensuring they have enough savings to last through retirement. But many of them are making inadequate saving decisions and finding themselves facing financial difficulty in retirement. As a result, the Department of Labor and the Department of the Treasury are reviewing retirement plan rules to determine if the retirement security of participants could be enhanced with arrangements aimed at providing a lifetime stream of income after retirement. Earlier this year, the agencies put out a request for comments on the topic from the retirement plan industry and the general public. In drafting its response, a financial services provider, Allianz Global Investors, with the help of Shlomo Benartzi, a behavioral finance professor at the University of California-Los Angeles, reached out to academics in the behavioral science field and asked each one for a “key insight” that they believed would be most helpful in creating policies and solutions to the issue. In its response, released earlier this week, Allianz presented the insights of the 10 academics and compiled their findings into a checklist that could be used by policy makers. “These insights can add a human dimension to the design of a retirement system, helping to prevent ‘behavioral blind spots’ that could dramatically compromise it,” Mr. Benartzi wrote in the report. “At a time when individuals are asked to assume more responsibility for their retirement savings, we believe the human element is a critical determinative factor.” So what are some of the main ideas? Here’s a look at a few we found interesting. Check out the response and let us know in the comments below which idea you find most interesting and why. Seeing Your Future Self: Daniel G. Goldstein, an assistant professor of marketing at London Business School and a research scientist at Yahoo Research, is exploring how new virtual reality technologies can be used to create future images of a person and how seeing those images could influence a person’s financial decisions. According to the Allianz response, the preliminary findings of Professor Goldstein and his fellow researchers suggest that seeing a digital future representation of one’s self leads to allocating more money toward retirement. The researchers have started testing a Web-based tool where the facial expressions of future age-morphed selves change based on a selected savings rate. How could this research be incorporated into solutions to address retirement savings problems? Here’s how it’s presented in the checklist for policy makers: Are the implications of today’s financial decisions vividly presented so employees see how their lives will be affected? For the full story, visit