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   Behavioral Finance
Insurance & Annuities
Important New Research
Talking to Seniors About Risk and Market Volatility
By Dan Richards
July 27, 2010

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Understanding financial concepts

Advisors need to be sure that conversations with seniors are at a level they can understand.

Math ability starts declining at age 53; by 80, almost half of seniors have difficulty making sound financial decisions.

That has broad implications for the kinds of conversations you can have – and also the need in some cases to get adult children involved.

Here’s a link to the full research report

And here’s a checklist from the report on having effective conversations around retirement income planning:


Inspired by the work of Professor…

Is the retirement income strategy framed in terms of the monthly income a retiree will receive?

Brown on Framing

Are the implications of today’s financial decisions vividly presented so employees see how their lives will be affected?

Goldstein on Vividness

Is the strategy appropriate for retirees who are hyper-sensitive to losses?

Johnson on Hyper Loss Aversion

Can retirement income decisions be made before the onset of cognitive impairment? Are the number and complexity of choices manageable for older individuals?

Laibson on Cognitive Impairment2

Does the retirement income strategy offer multiple accounts to facilitate different goals, such as paying the rent or spending money on vacations?

Loewenstein on Tangible Mental Accounts

Are employees, carried by inertia, assigned to a customized default that is appropriate to their situation?

Madrian on Inertia

Does the language used to describe the retirement income strategy make it easy to evaluate its features?

Payne on Evaluability

Does it encourage individuals to make active choices?

Previtero on Active Decision-Making

Does the retirement income strategy provide some inflation protection?

Shafir on the Money Illusion

Will it be perceived as fair by most retirees?

Shu on Fairness

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