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Financial Decision Making and Retirement Security in an Aging World$
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Olivia S. Mitchell, P. Brett Hammond, and Stephen P. Utkus

Print publication date: 2017

Print ISBN-13: 9780198808039

Published to Oxford Scholarship Online: November 2017

DOI: 10.1093/oso/9780198808039.001.0001

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Seven Life Priorities in Retirement

Seven Life Priorities in Retirement

Chapter:
(p.115) Chapter 7 Seven Life Priorities in Retirement
Source:
Financial Decision Making and Retirement Security in an Aging World
Author(s):

Surya Kolluri

Cynthia Hutchins

Publisher:
Oxford University Press
DOI:10.1093/oso/9780198808039.003.0007

Using a theoretical life cycle model, this chapter evaluates how much workers benefit from having the option to hire a financial advisor when it is costly for employees to rebalance their own financial portfolios. Results indicate that having access to a financial advisor at the start of one’s career can be quite beneficial. If delegation to an advisor is available only a decade after entering the labor market, the benefit of delegation is cut by half, and it falls further if delegation is available only later in life (at age 60). The chapter also examines whether simpler target date funds (TDF) and fixed weight portfolios benefit consumers, compared to the outcomes with customized financial advice. The authors show that the simpler portfolio products would need to be provided at zero cost, in order to benefit consumers as much as having access to a financial advisor.

Keywords:   portfolio inertia, life cycle saving, household finance, human capital, financial advice

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