Thomas Post
Associate Professor of Finance
Maastricht University

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I am Associate Professor of Finance at Maastricht University and affiliated with Netspar. My research, teaching, and consulting focus on behavioral household finance.


I aim to cover the complete financial decisions-making journey across the life cycle, starting from engagement (collecting information, planning), accumulating savings (how much and where to invest), and decumulation of pension assets. Let me illustrate my approach with a few examples:

Engagement

The earlier one starts planning for retirement to better – more time is available to build up a sufficient retirement nest egg. But, very few people are busy with doing so, especially in below the age of 50. To better understand this lack of engagement we fielded a survey among pension plan members – figuring out how cognitive and emotional factors relate to the willingness to gather pension information. Then, we used that knowledge to design email communications for two pension funds based on behavioral techniques – goal framing and social norms. In both cases, members of those funds receiving the new communication were twice as likely to become active and inform themselves about their expected pensions.

Accumulating savings

Many people save insufficiently for reaching an adequate life style in retirement. In several studies, we explored how individual factors such as financial literacy and knowledge, cognitive ability, subjective age identity, ability to imagine being in retirement relate to savings decisions. Then, in a series of experiments, we tested what we can do to increase the amount that people are willing to save. We translated abstract pension income numbers into concrete shopping baskets. That is, we showed people what goods and services different pension incomes can buy. By doing that, abstract numbers became concrete things that people could relate to, and they were more willing to save for retirement.

Investing savings

Investing in stocks for retirement is often recommended as in the long-term, even though stocks are volatile, they earn more return than a bank account. But, retail investors that in principle make the right decision and buy stocks then often “overdo” it. They frequently trade and turn their portfolio (wrongfully assuming they have stock picking and market timing skills). Ultimately, their net returns get hurt by transaction fees. To better understand this behavior, we used trading data from an online brokerage that we enriched with survey data on those traders’ expectations of returns and risk over time. We then designed an intervention that changed the way that investors in an experiment saw their performance (to long term past returns). In response, investors less often changed their opinion about where the market would move to – which we belief will reduce their trading frequency.

Decumulating pension assets

When savers arrive at the end of their working careers they wonder – what to do now with this money? Shall I regularly pay me an income from those assets and what income per month can I afford to not risk running out of money too soon. This is a difficult problem to solve and economists often recommend buying an annuity - a pension product that guarantees a lifelong income. However, in reality annuities are rarely bought. We looked into this issue by studying how people make sense of annuities, that is, how they financially value them. We figured out that for many people an annuity is too complex to do the math and also for those who do the math, they underestimate the annuity’s financial value. But, we discovered the formula that people used to do the math in our study! We then designed an intervention that gave people “the number” to use in their back-of-the-envelope formula. Their valuations became more realistic and their interest in annuities went up.