Lifetime Income for Women: A Financial Economist’s Perspective

Written by David F. Babbel

Published by Wharton Financial Institutions Center Policy Brief: Personal Finance

Her First Job at 66
Last December, I was attending a large sporting event in Philadelphia and sat next to an engaging couple. The woman had never worked outside the home, having been occupied with rearing eight children — a “his, hers and ours” type of situation. Her husband had been educated at one of America’s finest universities, had completed a very successful career, and then retired three years earlier from a well-paying profession. When the man and woman learned that I was a finance and insurance professor, the conversation turned quickly to financial matters.

They informed me that the defined benefit pension plan of the firm from which the man had retired had been discontinued and re-opened as a defined contribution 401(k) retirement savings plan. Under such plans, the investment risk is transferred from the employer and government entirely to the employees and retirees. This meant that instead of receiving a comfortable monthly income throughout the rest of their retirement, they received a lump sum of cash that they could elect to place in a menu of mutual funds, or withdraw all the cash, and use it however they desired. The man seemed to be quite concerned about their financial future, and suffered from several degenerative ailments. We discussed the treatment
options and prognosis, which were not hopeful.

If you are interested in the full article, download the article down below:

Exploring the Retirement Consumption Puzzle

by David Blanchett, CFP®, CFA

Wanting to learn more about consumer spending in retirement? This article discusses the following topics:

  • Empirical research on retiree spending has noted a “retirement consumption puzzle,” where retiree expenditures tend to decrease both upon and during retirement. This decrease in spending is inconsistent with general economic theories on consumption, which suggest individuals seek to maintain constant consumption over their lifetimes.
  • Government data on consumption was analyzed in this study to understand how retiree consumption actually changes over time.
  • The results of the analysis suggest that although the retiree consumption basket is likely to increase at a rate that is faster than general inflation, actual retiree spending tends to decline in retirement in real terms. This decrease in real consumption averages approximately 1 percent per year during retirement. 
  • A “retirement spending smile” effect is noted. This finding has important implications when estimating retirement withdrawal rates and determining optimal spending strategies.

What’s the Deal With Reverse Mortgages? Second Edition by Shelley Giordano, MA

As we enter retirements, the change in lifestyle is an inevitable challenge for almost every retirees. How can you preserve your lifestyle without steady income streams? How to utilize your existed assets to support your retirement? To answer these questions and offer more advice, Shelley Giordano launched “What’s The Deal With Reverse Mortgages” second edition on Kindle. Learn more about the retirement assets folks don’t know they have.

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Propriety Reverse Mortgage Products Could Eclipse FHA’s HECM Program in 2019

Written by Jamie Hopkins on July 2, 2019

The reverse mortgage market world heads in reverse away from the government created Home Equity Conversion Mortgage (HECM) and towards new propriety products. This is an encouraging sign because any healthy market needs competition, innovation, and variety. However, recently HECM program has been the driving force behind the reverse mortgage world, leaving many without an ideal solution to utilizing home equity as part of a sustainable retirement plan.

The article can be found here.

OP-ED: How Home Equity Improves Retirement Security

A new form of SRI: Secure Retirement Income

Two major retirement challenges could be addressed through a simple innovation. First, long-term investors are struggling to meet their (lowered) target rates of return. Attempts to raise returns by investing in riskier assets only raises the risk of future underperformance. Second, individuals have insufficient retirement savings and are facing the prospect of a meager retirement paycheck. A new real estate sub-asset class, iHomes (Income from Homes), created by innovative funds and real estate managers, could address these twin challenges with attractive results for all parties. The solution rests in allowing retirees to tap into home equity to generate income, and for innovative investors to get rewarded for supplying capital for these transactions.

To dig into the article regarding home equity and reverse mortgage, click here.

By  Dr. Arun S. Muralidhar on May 31, 2019