Select Publications:         

Trust, Financial Literacy, and Financial Market Participation

    with Jill E. Fisch, University of Pennsylvania

Journal of Pension Economics and Finance - (link to article)

Willingness to participate in financial markets is important for financial well-being, including the accumulation of retirement savings through self-directed pension programs. We consider the roles of two key factors, trust and financial literacy in financial market participation. We find both are strongly related to participation. Although trust is more uniformly correlated with increases in financial market participation, the relationship between financial literacy and engagement is u-shaped, with increases in financial literacy first associated with reductions and subsequently with increases in the levels of participation. Our findings suggest trust and financial literacy play different roles and that each is related to investment behaviors in important ways.

Developing Social Security Disability (SSDI) Reform Demonstrations to Improve Opportunities and Outcomes Based on Lessons Learned

   with Jason J. Fichtner, John Hopkins University

Committee for a Responsible Federal Budget  Fiscal Institute, McCrery-Pomeroy SSDI Solutions Initiative - LINK TO ARTICLE

Sections 821–23 of the Bipartisan Budget Act granted expanded authority for the Social Security Administration to engage in demonstration projects aimed at improving the opportunity for disability beneficiaries to remain attached to the labor force or return to work. Even in lieu of the budgetary issues, modernizing this program would be a good idea, and piloting reforms is an important part of that process. Fortunately, past demonstration projects and the program design literature offer important lessons. In this paper, we target these lessons to our own design of demonstration projects to modernize the SSDI program in the window of time currently granted by the 2015 Bipartisan Budget Act (BBA). We intend that the tenets we distill are fundamental enough to be applicable beyond this window. 

“Household Reactions and Strategic Responses to Retirement Wealth Building and Decumulation in a Low Interest Rate Environment”

   with Jason J. Fichtner, John Hopkins University

The Pension Research Council, University of Pennsylvania  -  (link to book chapter)

Recent economic conditions have vastly changed the retirement landscape as a lengthy period of low interest rates have made the risk of depleting wealth during the decumulation phase of retirement greater than at any time in recent history. This paper investigates how retired households have navigated the current low interest rate environment using the HRS from 1992 - onward to investigate impacts over the 2008 – 2014 low interest rate period. We document impacts on savings, wealth and asset allocation both ahead of and while in retirement. Comparing households who have been relatively successful over this period we find that equity market participation was key for building and preserving wealth.

Saving Social Security Disability Insurance

  with Jason J. Fichtner

The Mercatus Center  Working Paper Series  -  (link to article)

The Bipartisan Budget Act of 2015 (BBA) reallocated withholdings to allow the continued payment of benefits until roughly 2028. By then reforms will be needed. Sections 821–23 of the BBA mandate demonstration projects to develop program reforms that help disability beneficiaries remain attached to the labor force or return to work. This paper builds demonstration project designs that promote the logical testing of salient aspects of our prior reform proposals. We develop critical tenets for project designers. We emphasize both a modular design for demonstration projects and the sequence of projects as important for informing reforms that are humane and welfare improving while meeting both administrative and congressional needs. 

Enhancing U.S. Retirement Security through Coordinated Reform of Social Security Disability and Retirement Insurance Programs

  with Jason J. Fichtner.

The Journal of Retirement  -  (link to article)

This paper highlights disability reforms that would more likely motivate sound Social Security retirement reforms. Sound reforms increase both the financial security of the social security program and the financial well-being of program beneficiaries. Hence, we make a case for considering disability and retirement program reforms in tandem—that is, (1) developing disability program reforms that support plausible retirement program reforms while properly aligning incentives to support work and savings and (2) providing a financially secure, vital safety net for disabled Americans.

Social Security Disability Insurance Reforms to Improve Societal Wealth & Labor Force Participation

in: SSDI Solutions: Ideas to Strengthen the Social Security Disability Insurance Program, Randy Wynn, editor, Infinity Press. New York, NY.

  with Jason J. Fichtner.

McCrery-Pomeroy SSDI Solutions Initiative

This book chapter emphasizes the integration of DI to other social insurance programs, and to the 1990 ADA and 2009 ACA.  Emphasizing integration to these latter two programs we look for opportunities to enhance well-being, productivity and labor force participation.  We outline basic design parameters for SSA Demonstration Projects that may best reveal such opportunities in the 2017 - 2022 time frame. 

Recent Publications:

Are Alternative Investments Prudent? Public Sector Pension Use and Fiduciary Duty 

  with Paul Rose, The Ohio State University, Moritz College of Law

The Journal of Alternative Investments 18(3)

Pension systems have experienced two recessions, demographic shifts, and generally difficult public budget circumstances. Notably, pension systems have modified their allocation strategies over this period, generally shifting away from equities and fixed income allocations in favor of alternative investments.

In this article, we investigate motives for the employment of alternatives and the performance of these investments, considering both prudential and financial performance motivations. One performance motive for alternative investment is that riskier alternative products might allow pension funds to “catch up” and reduce unfunded liabilities. We refer to this as the “alpha” justification for alternatives investment. Another possible justification, related to both performance and prudence, is that alternatives simply allow pension funds to more effectively diversify risk and damp volatility. We refer to this as the “beta” justification for alternatives investment. We also consider possible principal-agent and herding problems that may be unique to these portfolios, and find that the prudent person standard exacerbates herding risks because of its relative benchmarking schema.

Individual and Collective Rationalization of Imperfect Choices Regarding Savings

Connecticut Law Review 47(5)       

I review six behavioral challenges to optimal savings at the individual and collective level. Linking the legal-philosophical and economic arguments further, I offer examples of sequential processing: sensing, cognition, and action as a path to behavior. Sequential processing is first described in the context of imminent danger frames, and then within the context of less urgent risks, employing straightforward economic modeling of hyperbolic discounting functions, which helps us to understand how present-bias phenomena play out to thwart optimal sequential processing over longer time frames on the individual level. I offer a simple example which generates simple savings/spending errors and then show how simple heuristics can compensate for these errors. Moving from the individual to the collective level, it appears that the first two sequential processing steps (sensing and cognition) are not as big a challenge to rational resource management—rather, it appears that the final step (action) is the bigger challenge in many modern societies.

Recent Event:

For those of you interested in Social Security Disability Insurance Reform, my co-author Jason J. Fichtner and I offered a summary of our DI reform work at the 2015 McCrery-Pomeroy SSDI Solutions Conference.   These materials formed the basis for our chapter in the book listed above.

• Link to our presentation materials

• You can find the SSDI Solutions website here: http://ssdisolutions.org