The Impact of Aging on Retirement Income Decision Making

Kasten, Gregory W.; Kasten, Michael W.
June 2011
Journal of Financial Planning;Jun2011, Vol. 24 Issue 6, p60
Academic Journal
The otherwise healthy senior client may experience substantial declines in cognitive function over time, even without clinical dementia. After peaking in middle age, the ability to make effective financial decisions declines. This presents the ongoing challenge to help older clients understand ever more complex retirement income planning. Pre-retirees and retirees tend to have hyper loss aversion. The brain sets aside rationality when it gets the benefit of supposedly expert opinion. The brain tends to give up responsibility, and instead transfers decisional authority to a perceived "expert" with little independent thought. Experts have recommended evaluation of two criteria for determining prudent retirement income strategies: first. clients' emotional capacity to deal with risk and uncertainty, and second, their financial capacity to deal with variations in portfolio value, longevity, and income delivery. We believe a third criterion should be added-clients' cognitive ability to grasp and integrate the implications of the retirement income solution. A new retirement income language and presentation skill set are needed to help retirees make better-informed decisions. Because the senior population is so vulnerable, and the impacts of financial decisions have such great consequence on their lives, we recommend that all retirement income decision planning and management be delivered by advisers serving in a true fiduciary capacity to their clients.


Related Articles

  • PSNC 2015: What Participants Really Want. Manganaro, John // Plan Sponsor News;2015, p84 

    The article presents the findings of the PLANSPONSOR Participant Survey on the research-supported insights on the decision making of retirement plan participants in the U.S. in 2015. The survey shows the confidence of individuals for secured retirement, the danger of overconfidence, mild...

  • Making Sense Out of Variable Spending Strategies for Retirees. Pfau, Wade D. // Benefits Magazine;Feb2016, Vol. 53 Issue 2, p51 

    The article focuses on the spending strategies for retirees such as the decision rule method and actuarial method.

  • Is the 4 Percent Rule Too Low or Too High? Pfau, Wade D. // Journal of Financial Planning;Aug2014, Vol. 27 Issue 8, p28 

    The author considers whether standard rule of annually withdrawing no more than 4% of one's assets during retirement is too strict or too liberal. He notes that tax considerations and uncertainty concerning investment performance could indicate that 4% is too high. Conversely, the availability...

  • Millennials Could Face Late Retirement. Cornfield, Jill // Plan Advisor News;2015, p77 

    The article discusses the impact of several factors to the retirement age of the retirees in the U.S. including the increase of student loan debt, financial management and apartment or housing rents in the U.S.

  • The parent trap — balancing the cost of aging parents. Preston, Margaret // Fairfield County Business Journal;8/6/2012, Vol. 48 Issue 32, p12 

    The article offers information on how to prepare for the financial issue of caring for aging relatives including consultation to financial advisers and the creation of a network of advisers.

  • Advisers mixed on income allocation. Shidler, Lisa // Crain's Cleveland Business;8/18/2008, Vol. 29 Issue 33, p19 

    The article discusses the report "Advisor Best Practices: Delivering Retirement Income and Transition Support," by Gallant Distribution Consulting and Practical Perspectives LLC, on financial advisers' ways to manage retirement income distributions to build retirement portfolios. The report...

  • Property is a drag. Henderson, Sam // Money (Australia Edition);Sep2015, Issue 182, p65 

    The article offers suggestion on retirement investment in Australia and states that property is far less reliable than shares. It suggests retirees with undiversified assets not to own an investment property in retirement. It advises investing in share market instead of investing in term...

  • Using the Personal Residence for Retirement Income. Allen Jr., James R. // Journal of Financial Service Professionals;Jul2015, Vol. 69 Issue 4, p71 

    For many retirees and preretirees, equity in their personal residence is the largest (or at least a substantial) portion of their total wealth. In addition to its being a significant financial asset, deciding what to do with the family home carries extensive emotional impact for the client. This...

  • Many Retirement Savers Missed 2013 Gains. Manganaro, John // Plan Sponsor News;2014, p86 

    The article discusses the results of a research analysis conducted by American financial services company Putnam Investments Co. reviewing the income replacement project data and market surges due to low equity allocations in the U.S. The analysis has described the number of retirement investing...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics