Overall, I thought it was a really good program. I enjoyed Richard Thaler, David John, and Moshe Milevsky's sessions the most.
This may be a dumb question, but many of the presenters kept referring to "the paper"; to which I kept wondering - what paper
? I don't see anything on the site, unless I'm just missing it.
I have provided some of my notes and observations below.
- Thaler's "pet idea" is to let people buy more Social Security benefits. During the Q&A, someone asked if this would lead to anti-selection but Thaler waved this off. I do think it's reasonable to assume that those who buy more SS would tend to be healthier and would lead to a degree of anti-selection, but I suppose you could price that in.
- The government is the best entity to bear the risk of a calamitous increase in longevity. Thaler gave his recommendation to students on how to get rich quick: open a reinsurance business in the Caribean, take in premiums until a big earthquake hits, and then fly to your island to live off the money. The analagoy is that this is what would happen to private sector insurers offering annuities if there is a big increase in longevity. Moshe Milevsky later, indirectly, provided the best rebuttal to this whole stream of thinking - life insurers sell annuities and life insurance, and these risks counterbalance one another.
- Reverse mortgages: terrible
name...who wants a mortgage, let alone a reverse mortgage. Nevertheless, we need to figure out a better way to help people use home equity to fund retirement.
- Mental accounting matters. Thank you! Mental accounting is thrown around here as a pejorative, but I've always thought it can be useful if it leads to the accomplishment of a goal.
- We need an auto retirement income solution. All countries are currently dealing with the issue of how to convert savings into income.
- Proposed approach [I may get some of these details wrong, but I understand there is a paper
(1) Pooled managed payout fund
(2) Additional balance available for emergencies
(3) Longevity annuity or self-annuitizing feature to avoid longevity tail risk
- I would personally put an annuity or some form liability matching strategy as #1, followed by the managed payout fund and the emergency fund.
- Tontines: watch the video, I cannot explain it here sufficiently.
- Good data showing individuals in Canada who purchase a SPIA often purchase (1) an annuity with a cash refund or installment feature and (2) no COLA (CPI or otherwise). So, while economists and actuaries appreciate the opportunity to purchase longevity and inflation insurance, the average person has little interest, as evidenced by purchasing patterns.
- T Rowe Price has a Managed Payout Fund coming out soon that will pay 5% of the average balance over the last 60 months. Only available within DC plans administered by TRP.
I didn't catch much of his presentation.
Discussed DC plan annuity purchase safe harbors and RMD rules (previously mentioned in this thread).
- Interesting data on rollover behavior:
- Only 11% to insurers or immediate annuity distributors
- 10% to brokers with significant variable annuity marketing efforts
- Another 40% to firms with active variable annuity marketing efforts
- i.e., not much data going to the "good guys"