## Retirement Behaviorist: Wharton Economist Olivia S. Mitchell ## Source details **Canonical URL:** [Retirement Behaviorist: Wharton Economist Olivia S. Mitchell](https://www.imf.org/en/publications/fandd/issues/2020/03/profile-of-wharton-economist-olivia-mitchell-on-pension-research) ## Other formats - [Markdown version](/en/publications/fandd/issues/2020/03/profile-of-wharton-economist-olivia-mitchell-on-pension-research/index.md) - [Structured JSON version](/en/publications/fandd/issues/2020/03/profile-of-wharton-economist-olivia-mitchell-on-pension-research/index.json) - [Bundle manifest](/en/publications/fandd/issues/2020/03/profile-of-wharton-economist-olivia-mitchell-on-pension-research/bundle-manifest.json) ## Bibliographic details - Authors: PETER J WALKER - Published: March 2, 2020 --- ### Profile and career highlights - Author of more than 250 books and articles. - Received more than 60 professional honors and awards. - Began working on pensions "40 years ago" when the field was largely actuarial. - Education and early career: - Bachelor’s degree in economics from Harvard in 1974. - Completed PhD at the University of Wisconsin in 1978, at the age of 25; dissertation on the effect of high local unemployment on married women’s participation in the labor force. - Early academic posts included Cornell University; later moved to the University of Pennsylvania’s Wharton School in 1993. - Public service: - Served on George W. Bush’s bipartisan President’s Commission to Strengthen Social Security in 2001. - Served on then-President Michelle Bachelet’s pension commission in Chile (reported as "five years ago" in the profile). ### Key findings on retirement trends and Social Security solvency - Demographics and scale: - US population aged 65 and over rose from 37 million to 49 million between 2006 and 2016. - By 2060 the number will almost double—to 90 million. - Social Security financing: - The trillion-dollar Social Security system is the main source of retirement income in the United States. - Starting in 2020, Social Security’s total cost is expected to outstrip its total income. - By 2035, system reserves will be depleted, making it able to honor just three-quarters of scheduled benefits. - Claiming behavior and incentives: - More than 40 percent of recipients currently claim Social Security benefits at the minimum age of 62. - Waiting until age 70 (maximum benefits) can increase monthly income by 75 percent compared with claiming at 62. - Social Security Administration has stopped using “break-even” analyses and now provides a more neutral treatment—reflecting findings that break-even framing biases early claiming. - Policy-relevant behavioral insights: - Framing retirement decisions as a break-even gamble on longevity encourages early claiming despite longevity risk and the fact that half of people live longer than their life expectancy. - Lump-sum incentives to defer claiming can be structured so they do not change overall program costs and are attractive to older people carrying debt. ### Financial literacy, wealth, and retirement preparedness - Transition from defined-benefit to defined-contribution plans increases individual responsibility and the need for financial knowledge. - Mitchell and Annamaria Lusardi developed the “Big Three” financial literacy questions used in the University of Michigan Health and Retirement Study of people over age 50; the “Big Three” have been used in surveys in more than 20 countries. - Measured impacts of financial literacy: - Financial literacy can explain between 30 and 40 percent of wealth inequality. - The most financially knowledgeable employees in a business received retirement plan returns 130 basis points, or 1.3 percentage points, higher each year compared with the average worker. - Scenario: If Social Security benefits were reduced by 20 percent (reflective of a projected future shortfall), incentives for low-wage workers to save and invest in financial literacy would rise; projections found median assets would increase by 32 percent among those without a college education and by 19 percent among the college-educated. ### Generational and household saving challenges - Millennials (born between 1980 and 2000): - Given low capital market returns, millennials seeking to retire at 65 must set aside 40 percent of their paycheck. - Current average savings rate is just 6 percent of paycheck. - Competing obligations—student loans, high housing costs—make a 40 percent saving target difficult; Mitchell recommends planning to work longer, redefining retirement to include part-time work, and embracing lifelong learning. - Increasing prevalence of debt among retirees: - Retirees today are more likely to have debt due to bigger mortgages, larger credit card debt, and the growth of student and payday loans. ### Policy design and practical interventions - Plan design to encourage later retirement: - Redesign Social Security and workplace communications to avoid break-even framing that biases toward early claiming. - Offer lump-sum incentives for delayed claiming that maintain overall program cost neutrality and appeal to indebted older workers. - Longevity income annuities: - A federal measure signed into law in December 2019 encourages employers to include annuities that start paying at least by age 85 in workplace pension plans. - Mitchell’s research shows that if people used just 10 percent of their retirement nest egg to buy a longevity annuity, it would boost well-being at age 85 by 6 to 14 percent. - Chilean reforms and international advising: - Recommendations for Chile included broader coverage, a more generous solidarity pillar for the poor, higher contribution rates, and lower fees and commissions for private pension funds; the government is pursuing some recommendations, including a higher solidarity benefit and lower fees and commissions. ### Current research agenda and outlook - Ongoing work includes: - Determinants and consequences of debt at older ages. - Impact of pension guarantees. - How alternative tax structures will alter the way people work, save, invest, consume, and retire. - Personal stance on retirement: - Mitchell states that, “barring very poor health, I will never retire!” *International Monetary Fund, F&D Magazine profile by Peter J. Walker, March 2020.* --- ## Content in this bundle - **خبيرة سلوكيات التقاعد** - [خبيرة سلوكيات التقاعد (Markdown version)](/-/media/files/publications/fandd/article/2020/march/ar/people.pdf.md){rel="alternate" type="text/markdown"} - [خبيرة سلوكيات التقاعد (PDF)](/-/media/files/publications/fandd/article/2020/march/ar/people.pdf){rel="external" type="application/pdf"} - **La pensadora de las pensiones ● Finanzas y Desarrollo ● Marzo de 2020** - [La pensadora de las pensiones ● Finanzas y Desarrollo ● Marzo de 2020 (Markdown version)](/-/media/files/publications/fandd/article/2020/march/es/semblanza-de-economista-wharton-olivia-mitchell-sobre-investigaciones-pensiones.pdf.md){rel="alternate" type="text/markdown"} - [La pensadora de las pensiones ● Finanzas y Desarrollo ● Marzo de 2020 (PDF)](/-/media/files/publications/fandd/article/2020/march/es/semblanza-de-economista-wharton-olivia-mitchell-sobre-investigaciones-pensiones.pdf){rel="external" type="application/pdf"} - **La béhavioriste des retraites** - [La béhavioriste des retraites (Markdown version)](/-/media/files/publications/fandd/article/2020/march/fr/profil-dolivia-mitchell-economiste-ecole-wharton-recherche-retraites.pdf.md){rel="alternate" type="text/markdown"} - [La béhavioriste des retraites (PDF)](/-/media/files/publications/fandd/article/2020/march/fr/profil-dolivia-mitchell-economiste-ecole-wharton-recherche-retraites.pdf){rel="external" type="application/pdf"} - **Retirement Behaviorist: Wharton Economist Olivia S. Mitchell – IMF F&D** - [Retirement Behaviorist: Wharton Economist Olivia S. Mitchell – IMF F&D (Markdown version)](/-/media/files/publications/fandd/article/2020/march/profile-of-wharton-economist-olivia-mitchell-on-pension-research.pdf.md){rel="alternate" type="text/markdown"} - [Retirement Behaviorist: Wharton Economist Olivia S. Mitchell – IMF F&D (PDF)](/-/media/files/publications/fandd/article/2020/march/profile-of-wharton-economist-olivia-mitchell-on-pension-research.pdf){rel="external" type="application/pdf"} - **专注于退休研究的行为经济学家 - 经济学人物 - 金融与发展 - 国际货币基金组织季刊 -2020年3月号·第57卷·第1期** - [专注于退休研究的行为经济学家 - 经济学人物 - 金融与发展 - 国际货币基金组织季刊 -2020年3月号·第57卷·第1期 (Markdown version)](/-/media/files/publications/fandd/article/2020/march/zh/people.pdf.md){rel="alternate" type="text/markdown"} - [专注于退休研究的行为经济学家 - 经济学人物 - 金融与发展 - 国际货币基金组织季刊 -2020年3月号·第57卷·第1期 (PDF)](/-/media/files/publications/fandd/article/2020/march/zh/people.pdf){rel="external" type="application/pdf"} --- _Source: https://www.imf.org/en/publications/fandd/issues/2020/03/profile-of-wharton-economist-olivia-mitchell-on-pension-research_