Anek Belbase

Overcoming Barriers to Life Insurance Coverage: A Behavioral Approach

While life insurance purchase decisions have long been studied, we still do not know how people decide if they need insurance or how much they need. Using in-depth interviews, we peer into the black box of employee decision-making to learn what people know about this employee-benefit, and how they decide if it is of value to them. We find that individuals understand the need for life insurance but find many behavioral economic barriers to getting adequate coverage, including mental accounting, money illusion, and the strong role of defaults. We then conduct an online experiment of the hypothetical employee-benefit purchase scenario and find a few, simple interventions could help individuals better decide their life insurance needs.

Slowed or Sidelined? The Effect of 'Normal' Cognitive Decline on Job Performance Among the Elderly

This paper examines the relationship between age-related cognitive decline and three potential workplace outcomes: 1) coping with increased job difficulty; 2) shifting to a less cognitively demanding job; and 3) retiring early. It uses data from the Health and Retirement Study (HRS) and the O*NET database. Critical components of the analysis are the metric used to measure cognitive decline, inclusion of cognitive reserve as an independent variable, and the use of overlapping 10-year observation windows. A key limitation is that the study cannot conclusively discern a causal relationship between cognitive decline and workforce exit. The paper found that: - About 10 percent of workers between the ages of 55 and 69 experienced steep cognitive decline over a 10-year period. - Workers experiencing steep cognitive decline were more likely to “downshift” to a less demanding job or retire than workers experiencing no cognitive decline. - Workers experiencing steep cognitive decline retired significantly earlier than planned, compared to workers who experienced no change in cognitive ability. - Workers without cognitive reserves were more likely to exit the workforce and retire earlier than planned, compared to workers with cognitive reserves. The policy implications of the findings are: - Cognitive decline might prevent a significant minority of older individuals from working to their planned retirement ages, and thus should be considered when assessing reforms that incent delayed retirement. - Policies that support “downshifting” to a cognitively less demanding job might help workers at risk of steep cognitive decline to remain in the labor force. - Further research is needed to identify whether workers in specific occupations are more susceptible to age-related decline than others, and whether anything can be done to moderate the effect of age-related decline in work ability.

Overcoming Barriers to Life Insurance Coverage: A Behavioral Approach: Overcoming Barriers to Life Insurance Coverage

While life insurance purchase decisions have long been studied, we still do not know how people decide if they need insurance or how much they need. Using in-depth interviews, we peer into the black box of employee decision-making to learn what people know about this employee-benefit, and how they decide if it is of value to them. We find that individuals understand the need for life insurance but find many behavioral economic barriers to getting adequate coverage, including mental accounting, money illusion, and the strong role of defaults. We then conduct an online experiment of the hypothetical employee-benefit purchase scenario and find a few, simple interventions could help individuals better decide their life insurance needs.

What Do Subjective Assessments of Financial Well-Being Reflect?

Subjective financial assessments are used by social scientists as a measure of financial well-being and by households as the basis for action. Financial well-being, however, increasingly requires workers to build-up savings to meet hard-to-see future needs, specifically retirement, their children’s education, and paying off student loans. This paper analyzes data from the FINRA Investor Education Foundation’s 2012 Financial Capability Survey to test whether subjective financial assessments 1) primarily reflect day-to-day, rather than distant, financial concerns; 2) increasingly reflect distant concerns if the household’s day-to-day finances are in reasonably good shape; and 3) increasingly reflect distant concerns if the worker is financially literate. The paper found that: * Subjective financial assessments primarily reflect day-to-day conditions. * This remains the case even if the household’s day-to-day finances are in reasonably good shape. * Financial literacy enhances sensitivity to the lack of a retirement plan and having a mortgage greater than the value of one’s house, but it has no noticeable effect on sensitivity to life and medical insurance deficits, having an inactive retirement plan, not saving for college, or student debt burdens. The policy implications of the findings are: * Subjective financial assessments have become a poor measure of financial well-being. * Workers by themselves cannot be expected to devote much effort to addressing distant deficits. * Initiatives to improve well-being must raise awareness – or compensate for the lack of awareness – of hard-to-see distant future deficits.

DOES AGE-RELATED DECLINE IN ABILITY CORRESPOND WITH RETIREMENT AGE?

While declines in physical and mental performance are inevitable as workers age, they are not uniform across the various systems of the body – some physical and cognitive abilities decline much earlier than others. This variance implies that workers in occupations that rely on skills that decline early may be unable to work until late ages, even as policy changes like increases in the Full Retirement Age (FRA) encourage them to. Researchers often estimate models of early retirement that include a control for whether a worker is in a blue-collar job – basically assuming that less-physical white-collar work allows longer careers. But this assumption ignores the fact that even workers in white-collar occupations may find themselves relying on skills that have declined. This paper instead reviews the literature on aging and constructs a Susceptibility Index meant to reflect how susceptible an occupation is to declines in ability, regardless of whether the occupation relies on physical abilities (as blue-collar occupations do) or cognitive ones.

Beyond Blue and White Collar: Age-Related Decline, Occupation, and Retirement Timing

Retirement timing research has accounted for age-related decline in ability to work by classifying occupations as blue or white collar, but this rough categorization may throw out information. Instead, this article presents a susceptibility index that measures how susceptible the abilities required by an occupation are to early decline. The results suggest that (1) considerable variance exists, especially within white-collar occupations, in the importance of abilities that are known to show early decline; (2) this variance, as captured by the index, is predictive of early retirement; and (3) this variance captures more information than the common white- and blue-collar distinction.

Cognitive impairment and Social Security's Representative Payee Program

Social Security’s Representative Payee Program allows one individual to receive benefits on behalf of a retiree or disabled person who is incapable of managing them. In the case of retirees with cognitive impairment, the program could help prevent fraud by ensuring that Social Security benefits are immediately turned over to a capable individual. This paper seeks to answer three questions about the Representative Payee Program and its relationship to cognitive impairment. First, what share of individuals with cognitive impairment use a representative payee? Second, if individuals with cognitive impairment are not using a payee, what are they doing instead? Finally, is it possible to identify recipients with cognitive impairment who have no help managing their finances (through a representative payee or otherwise), a situation that makes them especially vulnerable to fraud? This paper found that: • Just over 9 percent of retirees with dementia, the most severe form of cognitive impairment, have a payee, while only 2 percent of those with mild cognitive impairment have one. • Over 95 percent of retirees with dementia have some form of assistance with their financial management, whether it is a payee, a non-impaired spouse or child, a power of attorney, or through their residence in a nursing home. The comparable number for those with mild cognitive impairment is 85 percent. • Retirees with spouses or kids living nearby are less likely to use a payee, indicating they may view family as substitutes for a payee. • Less educated, non-white, and relatively isolated retirees are most likely to lack formal or informal means of assistance with their financial management. The policy implications of this paper are: • Most individuals with cognitive impairment seem to have an institution or individual available who could serve as a representative payee should an expansion of the program become desirable. • Educating family and other caregivers about a primary benefit of the program – that the vulnerable person does not have access to his or her money – may help expand coverage.