Papers by Olivia Mitchell
SSRN Electronic Journal
At least one co-author has disclosed additional relationships of potential relevance for this res... more At least one co-author has disclosed additional relationships of potential relevance for this research. Further information is available online at NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.
The Pension Challenge, 2003
SSRN Electronic Journal
The objective of this paper is to determine Americans' mobility patterns into and out of poverty ... more The objective of this paper is to determine Americans' mobility patterns into and out of poverty in their later years. We track how older adults enter into and exit from poverty using the most extensive longitudinal survey on older Americans currently available, the Health and Retirement Study (HRS). Using over 20 years of data from the HRS, we show that the conditional probability of escaping poverty diminishes as the number of years in poverty rise. In particular, older adults' chances of exiting poverty fall sharply as their time in poverty lengthens, especially between four and eight years. Having been in poverty that long, the chances of exiting poverty then levels out. These results imply that poverty among the US elderly can be quite a persistent state for many older adults although individuals that escape poverty are often able to have income above the poverty line in future years.
SSRN Electronic Journal, 2022
Recent research documents that people are increasingly entering old age with more debt than ever ... more Recent research documents that people are increasingly entering old age with more debt than ever before and with little or no retirement planning. This paper examines some reasons why older people's financial behaviors depart from the predictions of the life-cycle model, where the latter predicts that older persons would be at the peak of their wealth accumulation process and manage their money so as not to run out of savings in retirement. Drawing on the rapidly growing literature on financial literacy and financial behavior at older ages, we highlight findings on financial literacy patterns. We also document that "better" financial behaviors are strongly associated with greater financial literacy in later life. We close with some thoughts regarding limitations, policy implications, and next steps.
SSRN Electronic Journal, 2019
Over the life-cycle, wealth holdings tend to be highest in the early part of retirement. The qual... more Over the life-cycle, wealth holdings tend to be highest in the early part of retirement. The quality of financial decisions among older adults is therefore an important determinant of their financial security during the asset drawdown phase. This paper assesses how financial literacy shapes financial decision-making at older ages. We devised a special module in the Singapore Life Panel survey to measure financial literacy to study its relationship with three aspects of household financial and investment behaviors: credit card debt repayment, stock market participation, and adherence to age-based investment glide paths. We found that the majority of respondents age 50+ has some grasp of concepts such as interest compounding and inflation, but fewer know about risk diversification. We provide evidence of a statistically significant positive association between financial literacy and each of the three aspects of suboptimal financial decision-making, controlling for many other factors, including education. A one-unit increase in the financial literacy score was associated with an 8.3 percentage point greater propensity to hold stocks, and a 1.7 percentage point higher likelihood of following an age-appropriate investment glide path. The financial literacy score is only weakly positively linked with timely credit card balance repayment, both in terms of statistical significance and estimate size.
The Pension Challenge, 2003
The authors are grateful to conference participants, especially Zvi Bodie, Olivia Mitchell, and A... more The authors are grateful to conference participants, especially Zvi Bodie, Olivia Mitchell, and Andrew Samwick for comments. Lance Fisher, Geoffrey Kingston, Sachi Purcal, and Mike Sherris provided comments and discussion on earlier drafts. They acknowledge financial support from the Economic and Social Research Institute, Cabinet Office, Government of Japan, and the Australian Research Council. All opinions remain the authors' own.
The Pension Challenge, 2003
Pension Research Council Working Papers are intended to make research findings available to other... more Pension Research Council Working Papers are intended to make research findings available to other researchers in preliminary form, to encourage discussion and suggestions for revision before final publication. Opinions are solely those of the authors.
The Pension Challenge, 2003
The Pension Challenge, 2003
The German Retirement Saving Act instituted a new funded system of supplementary pensions coupled... more The German Retirement Saving Act instituted a new funded system of supplementary pensions coupled with a general reduction in the level of state pay-as-you-go old-age pensions. In order to qualify for tax relief, the providers of supplementary savings products must offer a guarantee of the nominal value a t retirement of contributions paid into these saving accounts. This paper explores how this "money-back" guarantee works and evaluates alternative designs for guarantee structures, including a life cycle model (dynamic asset allocation), a plan with a pre-specified blend of equity and bond investments (static asset allocation), and some type of portfolio insurance. We use a simulation methodology to compare hedging effectiveness and hedging costs associated with the provision of the moneyback guarantee. In addition, the guarantee has important implications for regulators who must find an appropriate solvency system for such saving schemes.
Over the last half-century, around the world, many nations have seen plummeting fertility rates a... more Over the last half-century, around the world, many nations have seen plummeting fertility rates and mounting life expectancies. These two factors are the engine behind unprecedented global aging. In this paper, we explore how the demographic transition may influence financial markets and, in turn, how financial market innovation might help resolve concerns flowing from global aging trends. We first provide context by reviewing the economics, finance, and insurance-related literature on how global aging patterns may influence capital markets. We then turn to insurance markets, and discuss a range of products and policies, including both retail and wholesale financial offerings for various forms of life annuities, long-term care benefits, reverse mortgages, securitization of longevity risk, inflation-protected assets, reinsurance, guarantees, derivative contracts on residential property price indices, mortality swaps and longevity derivative contracts. We also indicate how new public-private partnerships might be beneficial in enhancing the future environment for old-age risk management.
RePEc: Research Papers in Economics, Aug 1, 2006
Over the last half-century, around the world, many nations have seen plummeting fertility rates a... more Over the last half-century, around the world, many nations have seen plummeting fertility rates and mounting life expectancies. These two factors are the engine behind unprecedented global ageing. In this paper, we explore how this demographic transition may infl uence fi nancial markets and, in turn, how fi nancial market innovation might help to resolve concerns fl owing from global ageing trends. We fi rst provide context by reviewing the economics, fi nance, and insurance-related literature on how global ageing patterns may infl uence capital markets. We then turn to insurance markets, and discuss a range of products and policies, including both retail and wholesale fi nancial offerings for various forms of life annuities, long-term care benefi ts, reverse mortgages, securitisation of longevity risk, infl ationprotected assets, reinsurance, guarantees, derivative contracts on residential property price indices, mortality swaps, and longevity derivative contracts. We also indicate how new public-private partnerships might be benefi cial in enhancing the future environment for old-age risk management.
Financial Services Review
This paper examines whether retirees would benefit from staying in their companies’ 401(k) plans ... more This paper examines whether retirees would benefit from staying in their companies’ 401(k) plans after retirement, versus rolling their savings over to Individual Retirement Accounts (IRAs). Our focus is on individuals having low or moderate levels of financial literacy. We conclude that many such retirees would likely find it financially rewarding to retain their assets in their 401(k) plans. While IRAs currently offer a wider range of advice or distribution options compared with 401(k) plans, we close by pointing to legislative and technological developments that may produce better outcomes, more retirement confidence, and greater security for retirees.
AEA Papers and Proceedings
Oregon recently launched an automatic-enrollment retirement savings program for private sector wo... more Oregon recently launched an automatic-enrollment retirement savings program for private sector workers lacking access to other workplace retirement plans. We analyze participation choices, account balances, and inflow/outflow data using administrative records between August 2018 and April 2020. Within the small to mid-sized firms served by OregonSaves, estimated average after-tax earnings are low ($2,365 per month) and turnover rates are high (38.2 percent per year). Younger employees and employees in larger firms are less likely to opt out, but participation rates fall over time. Overall, we conclude that OregonSaves has meaningfully increased employee savings by reducing search costs.
This paper evaluates how cognitive ability and financial literacy shape the demand for financial ... more This paper evaluates how cognitive ability and financial literacy shape the demand for financial advice at older ages. We analyze a new module of the Health and Retirement Study which queried older respondents about their usage of financial advice and other financial management activities. Results show that cognitive ability and financial literacy are often positively correlated with advice-seeking for financial matters. Generally speaking, the more cognitively able tend to seek financial advice from professionals outside of family members; nevertheless, they are also more likely to be overconfident regarding their investments. The more financially literate also tend to ask for help with money management, but they are less likely to be overconfident. Overall, our findings are suggestive that cognitive ability as well as financial literacy can help shape older persons' money management behaviors.
SSRN Electronic Journal, 2019
We analyze debt and debt management of Americans nearing retirement age. We show that older peopl... more We analyze debt and debt management of Americans nearing retirement age. We show that older people have numerous financial obligations that can lead to financial distress. Using data from the 2015 National Financial Capability Study and an extensive literature review, we show that lack of financial literacy, lack of information, and behavioral biases help explain the prevalence of debt later in life. Our evidence indicates that debt at older ages can negatively influence retirement well-being.
SSRN Electronic Journal, 2017
This is the first study to use longitudinal data to explore both the antecedents and consequences... more This is the first study to use longitudinal data to explore both the antecedents and consequences of fraud victimization in the older population. Because older persons are close to or past the peak of their wealth accumulation, they are often the targets of fraud. This paper reports on analysis of the Leave Behind Questionnaires (LBQs) fielded on Health and Retirement Study (HRS) respondents over three survey waves in 2008, 2010, and 2012. We evaluate the demographic determinants and risk factors of reporting financial fraud victimization in the survey, and explore whether there are demographic subgroups of older victims. In addition, we examine the financial, physical and psychological consequences of fraud. Overall results suggest that there is no single reliable predictor of fraud victimization across all three LBQ samples. When LBQ responses were pooled across survey years, we found that younger, male, better-educated, and depressed persons reported being defrauded significantly more often. Victimization was associated with lower nonhousing wealth in the combined sample controlling for other factors, but had no measurable impact on cognitive, psychological, or physical health outcomes. Future research should examine predictors and outcomes based on the type of financial fraud experienced and the amount of money lost.
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Papers by Olivia Mitchell