Benjamin H. Harris

The Market for Longevity Annuities

Using a portion of accumulated assets to purchase a longevity annuity—which provides fixed income payments that begin in late old age with a substantial delay from the time the contract is purchased—offers a cost-effective means for individuals to insure against running out of money in retirement. Despite their conceptual appeal, sales of such products to date have been vanishingly small. The article discusses the factors that have inhibited consumers, employers, and insurance providers from participating in the market for longevity annuities and proposes reforms that could help to develop that market. These reforms include stronger efforts to educate consumers about the risks they face in retirement; permitting insurance companies to mention the existence of state guaranty funds when marketing annuity products; creating a more transparent safe harbor for employers who offer annuities within their retirement plans; and taking steps to develop or support the development of longevity bonds, which would allow insurance companies that offer longevity annuities to better hedge against the associated aggregate longevity risk.

Developing and Disseminating Financial Guidelines for Retirement Planning

Financial planning and decision making for retirement are challenging tasks. The effects on retirement finances of expected health-care costs, tax-based preferences for retirement saving, retirement benefits, housing values, and asset allocation mean that many retirees must play the roles of—or at least assess the advice from—doctor, accountant, realtor, and stockbroker. Retirees’ financial planning efforts are often hampered by lack of basic financial literacy, confusing or misleading financial products, high levels of debt, and the additional burdens of dependent adult offspring or advanced-age parents. There is substantial evidence that older households often lack financial literacy and often make poor financial choices, which can result in real economic hardship. The authors discuss criteria for developing and disseminating a single, comprehensive graphic to retirees and near-retirees to help bolster financial acumen and security.

Uncertainty and pension policy

This book provides a comprehensive appraisal of social security in Japan, where traditionally the burden of welfare provision has been the main responsibility of the family and employers, rather than the state. However, an ageing population, changes in family structure and continued recession has led to an urgent reappraisal of this situation.

Developing and Disseminating Financial Guidelines for American Households

Household financial planning can be challenging and household members often lack basic financial literacy skills. This paper discusses the potential and pitfalls of one approach to solving these problems — the development and dissemination of financial guidelines simple enough to be explained in graphic form. The discussion is motivated by the history of nutritional guidelines, namely the Food Pyramid and MyPlate. Financial and nutritional choices share several salient features, including the trade-off between current and future choices, the underlying complexity of the problem, and the auspicious effect that simple rules-of-thumb can provide. We conclude that financial guidelines can be most effective if they meet the following criteria. First, the guidelines should be simple, accurate, and comprehensive. Second, alternative versions of the guidelines should be developed to reflect the divergent economic circumstances of people at different points in the life-cycle, or who for other reasons face different economic situations. Third, the guidelines should be designed to be a focal point for the development of new, appropriate financial products and services. Fourth, the financial guidelines should be widely disseminated from an unbiased source of financial information and planning.