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Charting a New Course

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Abstract

People increasingly face insecure futures in retirement because policy has contributed to households’ rising risk exposure just as labor and financial risks have grown. The result has been that savings have become less stable—households cannot be sure that their savings will be available when they need them—and that wealth inequality has grown—a few households have seen substantial gains in their savings, while most households struggle with saving for their future. This situation is akin to being on a boat in a brewing storm, where the rich get state-of-the-art survival suits and life rafts, while middle- and low-income households need to find ways to sink or swim as they tread water.

Keywords

Mutual Fund Risk Exposure Saving Account Social Security Benefit Retirement Saving 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Notes

  1. 30.
    Christian E. Weller, “Making Sure Money Is Available When We Need It” (Washington, DC: Center for American Progress, 2013);Google Scholar
  2. Christian Weller and Kate Sabatini, “From Boom to Bust: Did the Financial Fragility of Homeowners Increase in an Era of Greater Financial Deregulation?” Journal of Economic Issues 42, no. 3 (2008), 607–632; Christian Weller and Sara Bernardo, “Aging with Risk: Has Financial Risk Exposure Grown Faster for Older Households Since the 1990s?” Journal of Aging and Social Policy (forthcoming).CrossRefGoogle Scholar
  3. 34.
    Considering what we know about heuristics in financial decisions, most households will choose to make the minimum amount to get the higher credit, so that the minimum share of the credit that goes into a savings account has to be reasonably large to build substantial savings over time. For a discussion of heuristics in financial decisions, see Shlomo Bernartzi and Richard Thaler, “Heuristics and Biases in Retirement Savings Behavior,” Journal of Economic Perspectives 21, no. 3 (Summer 2007), 81–104. For a summary of the evidence on so-called anchoring of complex financial decisions that inform some of the relevant heuristics,CrossRefGoogle Scholar
  4. see Cass Sunstein and Richard Thaler, Nudge: Improving Decisions about Health, Wealth, and Happiness (London, UK: Penguin Books, 2009), 120–133.Google Scholar

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© Christian E. Weller 2016

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