Personal financial planners are listening to behavioral economists.

Allianz Financial Personal Financial Planners Seek Wisdom from Behavioral Economists

While discussion about the so-called “retirement crisis” has primarily focused on sufficient savings for retirement, a post-retirement side of the issue has been brewing--the threat of outliving assets. That's becoming a bigger risk than ever, according to personal financial planners.

In an effort to understand and solve this “post”-retirement crisis, personal financial planners at Allianz, a global financial services company, has been tapping into the vast body of academic research by behavioral economists on personal finances. 

The Allianz report entitled Behavioral Finance and the Post-Retirement Crisis provides insight from academics on the behavioral aspects of savings for retirement decision-making which will directly impact retirees’ quality of life in the years after they retire. Allianz released the report in May 2010 for its personal financial planners and the public at large.

Behavioral Economists on the Shift from Defined Benefits Plan in Savings for Retirement

There are several reasons why personal financial planners should approach the post-retirement crisis from the perspective of a behavioral economist.

  1. With the shift from the defined benefits plan to defined contribution programs, the responsibility to develop savings for retirement that provide income for life is now increasingly borne by individuals instead of employers. Thus, understanding how people make financial decisions is critical.
  2. Another reason: Behavioral economists played a major role in helping with the accumulation phase of retirement. For example, work by behavioral economists helped change the design of 401(k) plans and boost employee participation rates. It was a key contributor to the Pension Protection Act of 2006.
  3. The work of behavioral economists can also offer significant insight into post-retirement decision making. The Allianz report explores academic research on topics such as risk aversion, cognitive impairment and active choosing, which shed new light on factors affecting retirees’ decision-making capabilities.

Significance of Behavioral Economists Regarding Savings for Retirement

By considering the behavior of retirees, personal financial planners can better address the needs of this client segment and tailor solutions to help them achieve a secure retirement. The Allianz report ends with a behavioral economist checklist to help policy makers and others evaluate retirement income strategies from a behavioral perspective.

Topic: Financial Advisors

Subtopics: Introduction to Personal Financial Planners • Value of Financial Advisors • Retirement: The New Target • Behavioral Economists • Retirement Income Industry Association • Retirement Income Security • Four Tips • Two Tips • Four More Tips • The Best Financial Advisors • Ten Barriers

 

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Topic: Financial Advisors

Subtopics: Introduction to Personal Financial Planners • Value of Financial Advisors • Retirement: The New Target • Behavioral Economists • Retirement Income Industry Association • Retirement Income Security • Four Tips • Two Tips • Four More Tips • The Best Financial Advisors • Ten Barriers

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