Behavioral Economics Of A Pensioners Choice

Many employees take retirement benefits for granted, but the sad truth remains that almost half the working population is employed

There are several effects and problems caused by the fact that the population of the UK appears to be growing older. Throughout this essay i will attempt to identify these numerous problems, which include the history and demography of the country, overview of the problem, causes and effects and eventually the solution. Then I will attempt to round the essay off with an effective conclusion which will identify the key body of my text and give a general consensus of what I have stated.

The world population is growing at a rapid pace and the global population is estimated to be around 9 billion in 2050. With the accelerated growth of the global population comes similar growth amongst aging societies. Aging societies is defined as the increased longevity of life amongst a population of people within a developed or developing country and considered to be those age sixty and older. In 1950, the percentage of the global population that was over age 60 was 8%, but it’s projected to reach 21.1% by 2050.

Since elderly populations are now increasing, one-fifth of individuals in developed countries are over 60 years old and if this pattern tends to continue it is projected that by 2030 there will be 1/3rd of individuals older than 60. Many may believe that the most elderly people come from the United States, but clear research shows that 59% of the world elderly individuals are found in developing countries. Japan also had a moderate increase in elderly individuals from 7% to 14% in just 26 years, other Asian countries will see similar increasing patterns as well. Europe has seen some similar life expectancy increases over the range of 100

Finance stability has been a problem since “big business”, the Gilded Age in the 1870s, the Stock Market Crash in 1929, and even with the sixteenth amendment in 1913. Living is becoming expensive in the 21st century automobile expenses, house payments, food, clothing, and so on are ways an individuals income can be tampered with. That’s why America should learn to budget themselves to keep money in their pockets. When it comes to making decisions on purchases one should, "Wait overnight, put some time between your emotions and the transaction." (Rachel Cruze). Saving money will not only build your income but the savings act as a ‘life line”; this prepares you for a life time enjoyment after retirement, provide a safety net in case of an emergency and aid in being financially

With defined contribution plans the risks and rewards are reversed. Since the retiree both assumes risks and reaps benefits, periods of economic growth cause the retiree’s wealth and income to increase and negative market changes cause the opposite to occur. Employers have agreed to a fixed amount and are unable to adjust their contributions downwards. In essence, with this type of pension plan the employer does not take on the risk of their obligation changing unexpectedly, the pension funds being inadequate to meet their obligation or any added periodic expense of carrying a pension plan. Once retirement occurs, the company’s

Aging can be considered a natural occurrence; it affects the health of an individual and the quality of life they live. Occupationally, a part of aging that is inevitable is retirement. There isn’t a definitive answer for retirement because different groups and individuals may have different perspectives of what retirement means to them. However, what remains concrete, is that retirement provides many people the opportunity to do things they want to do rather than things they must do (Kail and Cavanaugh, 2013).

The average lifespan is increasing from prior generations. People need to save more to have long-term financial security. Like most Americans, Tim Egan has virtually nothing saved for his retirement. Why are so many people not confident in their abilities to retire comfortably?

Retirement for workers is inevitable when they reach certain a age. They therefore need to plan effectively in order to have a successful life after retirement. In most cases, people retire without considering what will happen life after that. Qualitative retirement therefore means that planners have to come up with a retirement plan that fits their clients such that they serve the best interests of their employees. The articles provided address various qualitative considerations for effective retirement plan. The two articles address considerations such as the availability of involuntary or voluntary retirements, factors such as emotional or psychological and a retirement model called age-banded model.

Pension adequacy is predominantly assessed by its ability to ‘prevent poverty, to replace earnings of pensioners before retirement and to ensure a living standard on par with the younger population.’ The objective of a pension policy is to offer retirees an income that enables them to have a reasonable ‘living standard and protect them from the risk of poverty and deprivation.’ During retirement, the majority of the older population depend on pensions to act as their main source of income in addition to any pre-retirement savings (for example, income from assets such as a home.) [10] The extensively used measure of pension adequacy consists of comparing retirement income to income of other age groups.

Universally, the number of older adults is growing faster than any other age group. Specifically, by 2030, individuals age 65 and over will be about one-fifth (1/5) of the U.S. population

Millions of expats living in Europe feared that they would see their pensions frozen, as some who have moved outside of the UK currently face. Currently, about 550,000 British pensioners (4% of all recipients of the State Pension & approx. 50% of those living overseas) are affected by the government’s frozen pension policy. Each year, UK pensioners in the EU, Barbados, Bermuda, Israel, Jamaica, Mauritius, and the Philippines receive pension payments that increase each year. The government’s frozen pension policy freezes the pension of a UK citizen at the first level received for the rest of their life abroad, which ultimately decreases pension payment in real terms. Many people who are currently affected by frozen British pensions often experiencing financial difficulties and tend to have to depend on other sources of income. The UK may impose a frozen pension policy on state pensions being paid outside the EU depending on the agreements underway between the UK and EU.

The world is on the verge of a demographic milestone. From the start of documented history, young children have outnumbered their elders. However, during the past decade the number of people aged 65 or older outnumbered children under age five. Due to fall in fertility rates and significant rise in life expectancy, population ageing will continue or even accelerate. According to WHO, the number of people aged 65 or older is expected to increase from 524 million in 2010 to approximately 1.5 billion in 2050.

When the government or other agencies use money that was meant for pensions for other reasons, and don 't replace the funds, this could create a pension deficit or liability. Another way in which a deficiency may occur is to have thousands of people retire or laid off at the same time.

Behavioral finance has also discuss about how certain groups of investors behave, and what kinds of portfolios they choose to hold and how they trade over time. It is simply to explain the actions of certain investors, and these actions also affect prices. Some of the actions of investors and the behavioral ideas are insufficient diversifation, naive diversifation,excessive trading, the selling and buying decision.