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Retirement & Behavior in Our
Defined Contribution Society
Is Retirement Past its Prime?
Michael S. Falk, CFA
ProManage, LLC
Overview
 Today’s Retirement
 What has been Learned
 Tomorrow’s Retirement
Today’s Retirement
1. Demographic Landscape
2. Economic Implications
3. The Individual
Demographic Landscape
 Shifting Dependency Ratio(s)
 Globalization
Economic Implications
People Can…
Retire
Not Retire
Focal Point
Dependency
Ratio rises
Government
Costs rise
GDP
May ▼
?
Inflation
May ▲
?
Cost of Capital
May ▲
?
Investment Returns
May ▼
?
The Individual
 Increased Responsibility
 Lack of Financial Literacy
 Education has been about Quantity


How much can be saved
How much will be needed
What has been Learned
1. Lifetime Income
2. Behavior
3. Quality Matters
Lifetime Income
 The Defined Benefit Demise


Changing regulations
Creative destruction
 Social Security


Designed as social insurance
Became USA’s DB plus
Behavior
 “Hedonistic” Consumption
 Inertia

Defaults
 Choice

Less is more
 Loss aversion & Regret
Quality Matters
 Is Retirement the “Best” Goal?
 Health & Happiness
Tomorrow’s Retirement
1.
2.
3.
4.
Employment Incentives
Behavioral Solutions
Social Insurance
Innovative Designs
Employment Incentives
 Phased Retirement
 Quality of Life
Behavioral Solutions
 Design success

Defaults as a Positive
Overcome inertia
 Overcome de-motivating choice
 Overcome financial literacy hurdles
 Limit irrational behavior

Social Insurance
 Social Security

73
Demographic destiny?
 Today’s biological equivalent



Too important to too many
But, negatively impacts savings behavior
Innovative Designs
 Re-Define Retirement
 Income Solutions