Talking to Seniors About Risk and Market Volatility
July 27, 2010
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:
Checklist |
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 |
Display article as PDF for printing.
Would you like to send this article to a friend?
Remember, if you have a question or comment, send it to .
