Promoting Lifelong Financial SecurityPresentation before the Oregon Retirement Savings Board

December 14, 2015

John ChalmersAbbott Keller Professor of Finance

Lundquist College of BusinessUniversity of Oregon

Oregon Retirement Savings Board:

• M MMM MMMM MMM,MMM M MMMMMMMMM MMMMMMMMM MMMM MMMMMM MM M MMMMMMM MMM MMMMMMM MMMM MM M MMM.

• MMMMMMMM M MMM MMM, M MMM-MMMMM MMMMMMM MMM MMMM,

.

Goal set by the ORSB

Life Cycle Finance

•Tuition• Student Loans

Education

•Debt Repayment• Savings and Investment

Choices

Career

•When to Retire?•Health Costs• Spending Choices

Retirement

Consumption (Housing, Medical, Food, Entertainment, etc)

Life Cycle Finance

•Tuition• Student Loans

Education

•Debt Repayment• Savings and Investment

Choices

Career

•When to Retire?•Health Costs• Spending Choices

Retirement

Consumption (Housing, Medical, Food, Entertainment, etc)

Education

MMM MM MMMMMMM:MMMMMM MMMMMM MMMMMMMMM, M MMM-

M MMM MMMM MMMMM MMMMMMM MMM MMMM MMMMMMM. M MM MMMMMMM MMM MMMMMMM MMMM MMMM MM MMMMMMM, MMMM M MMMMMMMMMM MM M MMMMMMMMM.

Life Cycle Finance

•Tuition• Student Loans

Education

•Debt Repayment• Savings and Investment

Choices

Career

•When to Retire?•Health Costs• Spending Choices

Retirement

Consumption (Housing, Medical, Food, Entertainment, etc)

Career – saving for later

••

• M MMMMM:•••

••

•

•

Evidence: Invest Savings Well: M MMM M MMMM MM MMMM MMMMMMMMM MMMMMM

M MMM? (MMM M MMMM MMM MMM M MMMMM (MMMM))• M MMMMMMMM MMMMMMM? • M M MMM MMMMMMMM MMMMMMM MMMMMMM MMM?

Get Advice?Yes

Get Advice?No

Want Advice?

Yes

(Y, Y)Advised and

follow it

(Y, N)Target-date fund

default

Want Advice?

No

(N, Y)Unsolicited

advice

(N, N)Self-directed

If no advice, what happens?

Evidence: Invest Savings WellM ) M MM MMMMMMM MM MM MMMM MM MMMMM M M MMMMM?

• M MMMMM M MM MMMMMMM, MM MM M MMMMMMM, M MMM MMM MM MM MMMMMM, MM MM MMMM MM MM M M M MMMMMMM MMMMMM M M M MMMMM MMM M MM MM.

M ) M MM M MMM M MM MMM MM M M M MMMMM MM MMMMM MMM MMMMMM M MMM MM MMMMMMM MMMMMM MM MMMM MM MMMMM M MMMMMM?

• MM MM M M M M , MM M M MMMMM MMMMMMM M MM MM M MMMM MMMM MM M MMM M M M MMMMMMMMMMMM MM M M MM M M MMMMMMM MM M M MM.

• M M MM MMM MM MM MM MMM MM MM M M M MMMM M MMM M MMMMMMMM MM MMMMMM M MMMMMMM (MM MM M MMMMMMMMMM/MMMM M M MMMMMMM)

• Good news for policy – M M MM M M M M MM M M MMM M MM MMMMMMMMMM MMMMMMM M M MMMMMM MM MMMMM MMM MM MM M MMMM MMMMM!•• M MM M MMM, M MMM-

M ) M MMM MM MMM MM MMMM M M M MMMMM MMMMM M MMMMMMMMM M M MMMMM MMMMMMM’ M M MMMMMMMM?

• M MM MM M MM MMMM M M MM MM MMM M M MMMMMMMM MM MM MMMMMMM M MM MM MMMMMM M MMMMM, M MM MMMM-

Life Cycle Finance

•Tuition• Student Loans

Education

•Debt Repayment• Savings and Investment

Choices

Career

•When to Retire?•Health Costs• Spending Choices

Retirement

Consumption (Housing, Medical, Food, Entertainment, etc)

Retirement –•

••

• MMMM MMMMMMMMM MMMMMM MMMMM MMMMM MM:•• M MMMMMMMM M MMMMMM MMMMMM M MMMM MMMMMM (M MMMMMMMM MMMM MMM ) MM

• Annuities are confusing –•

Retirement -- Evidence from Oregon

• is chosen by 85% of PERS retirees –

•

•

MM MMM MMM M MM MMMMMMM MMM M MMM MMMMMMM MMM M M M M ’M

Retirement --Life Expectancy is Increasing

Marketing Savings

• M MM MM MMMM ?

•M M , M M MMM MM MMMMMMM MM M MMMMMMM MM MMMMMM MMM

• M MMMMM M M MMM M MMMMMM (MMMM MMM M MMM MM MM MM. MMM)• “Closeness” M M MMM M MMMMMM M MMMMMMM (MMM, M MMMMMMMMM, MMMMMM,

M MMMMMMMM)