City Research Online

Abstract

This article examines how behavioral economics can be used to improve the spending decisions of retirees, using a SPEEDOMETER (or Spending Optimally Throughout Retirement) retirement expenditure plan that employs defaults within a choice architecture. The plan involves just four key behavioral nudges: (1) first, make a plan-ideally by being auto-enrolled into one or with the help of a financial adviser; (2) automatic phasing of annuitization, which is designed to tackle the aversion to large irreversible transactions and losing control of assets, and so allows the greatest possible degree of flexibility in managing the rundown of retirement assets; (3) capital protection in the form of "money-back" annuities that deals with loss aversion, that is, the fear of losing your money if you die early; and (4) the slogan "spend more today safely" that utilizes hyperbolic discounting to satisfy the human trait of wanting jam today, and to reinforce the idea that "buying an annuity is a smart thing to do". © Risk Management and Insurance Review, 2013.

Publication Type:	Article
Additional Information:	This is the pre-peer reviewed version of the following article: Blake, D. and Boardman, T. (2014), Spend More Today Safely: Using Behavioral Economics to Improve Retirement Expenditure Decisions With SPEEDOMETER Plans. Risk Management and Insurance Review, 17: 83–112. doi:10.1111/rmir.12007, which has been published in final form at http://onlinelibrary.wiley.com/doi/10.1111/rmir.12007/abstract. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving
Subjects:	H Social Sciences > HD Industries. Land use. Labor > HD61 Risk Management H Social Sciences > HG Finance
Departments:	Bayes Business School > Finance
SWORD Depositor:	Symplectic Administrator

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