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[Music] Olivia welcome I'm so so excited to talk with you about your research but before
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we get into your research I'm very eager to learn about you your background your
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journey to Wharton and how let us get to know you the person before we get to dive in to you the professional well
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it's a great pleasure to be with you and thank you Erica for all you do for the
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school and the world I was really doomed to become an economist both of my parents are economists or were they've
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now passed and over the kitchen table in our house there was a clock which read time is money so with that in my
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environment what else could I do but become an economist so I went to high school in Lima Peru in Santiago Chile my
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father was posted there as a diplomat and and um after that I taught kindergarten decided that wasn't my cup
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of tea and then I went on to teach literacy to the slum dwellers that lived around Lima who didn't know how to read
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and therefore couldn't even take a bus because they didn't know what it said on
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the bus when I went to college in the US I continued working on development topics um I wrote a senior thesis on uh
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the difficulties and challenges of worker self-managed firms in Peru then I went on to graduate school where I
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decided to diversify a little bit and start to study Public Finance and um my first job right out of
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school was teaching at Cornell University where my department chair said to me please teach a course on
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pensions and health insurance well I was 25 years old I had no clue so I read the
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book quickly and I thought this is an interesting topic then I came to Wharton hired to continue studying pensions and
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issues of retirement security and here I am I've never deviated from that path
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did you always know that you were going to pursue a career in Academia no I had no idea I was going to become an
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academic I always had a five-year plan so when I finished graduate school I interviewed with the World Bank of the
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Foreign Service some other companies and I thought well I'll give it five years
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in Academia and then another five and here I am 41 years later still say I'll
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give it another five uh and so you've been at Wharton for how long 30 years and um it's been terrific I was brought
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in to work on directing the pension research Council uh but I've also been teaching I teach a course now um open to
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all undergraduates at Penn called con consumer financial decision making and it's all about the kinds of things you
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need to know as an adult moving into the financial world and you created that course Nick rusanov and I created it
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it's always completely booked up it's a ton of fun and the students write to me
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later saying oh can you help me with my 401k Choice things like that so other than
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retirement planning what are some of the other consumer choices that you discuss
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in the class oh we talked about everything from student loans whether you should rent or buy a car take a
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lease or buy a car whether credit card problems whether you should pay only the minimum every month which too many
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people do and then we go through the life cycle so at some point you might think about trying to buy a house or an
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apartment at some point you probably early you should think about disability insurance life insurance starting a
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family um all the things that get 529 plans that are tied up with that and then of course we need to think about
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saving for retirement from a very young age because if you don't you're going to
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not wish that you had a little bit later well let's dive into your research a
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little bit I want to take it back to the beginning because your research actually
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as you've illuminated spans decades and covers a variety of different topics in
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both finance and economics what Drew you to those topics I know you said you were
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doomed to study stud but what was it about that those fields that resonated with you so much well I got involved
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back in 1992 with a uh great study called the health and retirement survey and this is
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a dashly representative study of people over the age of 50 financed by the National Institute on aging and we
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surveyed 20,000 people every two years from when they enter until they pass away and we also have merged with their
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permission their Social Security earnings records benefit records Medicare records and so forth so we can
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see what are the factors driving their retirement saving when they claim their benefits and what happens to them in
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later Life along the way I decided to launch a short module on financial literacy trying to find out answers to
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very simple questions one on inflation one on interest rates and one on risk diversification and I was shocked to
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find out that fewer than half of the older American population 50 and over could answer all three questions right
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so if they can't do that how are they going to decide if they've saved enough
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or invested enough or maybe they'll withdraw their money too quickly from their retirement pot in in later life so
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that led to a a big effort to try to enhance financial literacy our survey has now been delivered in over 150
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countries it's part of the high school test that they do in Europe to examine
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students financial literacy and it's just been a fascinating effort that is um again so important done reflecting
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all of the things that I didn't know when I was coming of age and even into adulthood until it's almost too late to
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make good choices your research Del was into the intersection of Behavioral economics and
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retirement planning so tell us more how you think about be the concept of Behavioral economics and what does that
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actually mean well the whole behavioral area has been one of enormous growth over the past 20 years um and as it
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pertains particularly to the retirement age plus population what I focused on is
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the kinds of things that people don't know about their own future life livelihoods so um in one very
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interesting example a colleague from Microsoft research showed people a picture of their current face and then
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with software aged the face and there was a slider button at the bottom and as you slid the button to the right you
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save more for retirement the face at the right your future self became happier and happier as you slid the slider to
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the left the current phase became very cheerful and the the guy on the right was morose and so this is the kind of
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thing that you realize people need to visualize their future selves and in fact I've recently been talking to
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people about trying to design an avatar to try to go through alternative retirement scenarios to get a sense of
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what it would be like if I didn't save what would happen if I quit like my daughter wanted to at age 45 and retire
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and so on and I think that really is helpful and it's it teaches us the kinds
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of Behavioral obstacles people face when they try to visualize themselves in the
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future so as I get closer and closer to retirement we hope not not not anytime soon but every year I'm closer and
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closer I think about you know it sometimes it can be daunting to think about all of the options and all the
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considerations and because for most of us it's not something that we were taught earlier in life do you find that
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as you're interacting with people of different Dem graic ages that they are either more or
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less receptive to learning and changing behaviors in a way that would prepare them for their future retirement well
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one of the things we've been looking at recently is the concept of longevity
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risk not only people not have to have a sense of on average how long they'll
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live but also what's the tail of the distribution what are the chances you'll
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survived to 85 995 105 and so forth and so what we see is there are big differences demographic differences
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interestingly enough in the US the black population seems to think it will live longer than it will given the objective
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survival table women tend to underestimate how long they will live so all those factors shape how much you
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save whether you claim your Social Security benefits too early and whether you spend your money too quickly and run
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out of money in later life so what we've been doing is trying to come up with
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simple explanations did you realize someone a male let's say 65 has a 35% chance of
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living to age 90 and higher for women and that kind of very simple explanation actually gets people to step and say oh
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number one I regret I didn't save enough number two I regret claiming my social
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security benefits too early and number three I wish I had bought long-term care insurance and an annuity so there are
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ways that we're trying to bring these subjects to people in a way that makes
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it very concrete and very individual and helps them make better financial decisions your work has influenced
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policy decisions globally can you share particular instances where your research
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directly impacted retirement policies either here or somewhere outside of the US and how did it shape your Notions for
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what to study going forward I had the Good Fortune to work on President George W Bush's commission to strengthen Social
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Security this was 20 plus years ago it was a bipartisan commission eight democraty Republicans co-chaired by
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Senator Daniel Patrick boan and Richard Parsons and it was an amazingly wonderful group hardworking
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really devoted to try to help fix Social Security before we reach the situation we're in now um so we had a good plan
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which was basically to reduce the growth rate of benefits but not cut benefits and then the second piece was to allow
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people if they wanted to set aside part of their social security taxes in a personal account long and short of it
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due to political opposition and also the fact that that year was 911 the plan was dead in the water
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it's currently estimated that Social Security will become insolvent by 2033 and Medicare as well shortly
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thereafter and at that point the benefits will have to be cut by 25 to 30% for everybody or taxes will have to
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be increased by about 30% around the world the issue is very consistent populations are aging fertility rates
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are declining and so there simply isn't the demographic mass of workers that can
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help support people in later life to the extent that they become accustom and people are living longer and people are
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living longer exactly so what that says to me is that we're all going to have to
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work a lot longer it's not a popular View and especially in countries like France where the the prospect of raising
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the retirement age from 62 to 64 and Drew out math demonstration in the street I'm curious whether you think AI
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has any influence or any role to play in the future of well very interesting topic everyone is obviously speculating
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like crazy I do think that artificial intelligence can help us do a better job tailoring our our life cycle saving and
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investment and withdrawal profile uh right now the in the US at least we tend to have
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one siiz fits-all Solutions so Target date funds are very popular in retirement plan they say okay how old
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are you what's the year you're going to turn 65 boom we're going to put you in
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that Target date fund and the rest is is not necessary to be discussed but obviously people are different right now
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if you put in simple questions to AI you know they tell you well 6040 is a good stock Bond allocation it's still very
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simple so there's some and the other problem is that at the payout phase things get much
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more complicated so there's progress there's optimism um and I can't wait to see what
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happens I think that's true for for many of this what do you find has been the
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most challenging thing to convey to either organizations or to individuals to help them understand the urgency of
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of needing to find solutions for our current problems with the pension and social security
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systems probably the most difficult concept is a deepr rooted one which is that people simply have a hard time
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thinking into the future way back when when I started working with the Social Security
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Administration they only used a 10-year projection period to see if the system was solvent well 10 years years is
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nothing for people that are just starting their work lives or even age 55 or 60 so over time Congress induced
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Social Security to take a 75-year window so now they do their Pro projections for
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that period and their their logic is that well the baby born today will probably live to age 75 but there are a
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lot of more babies who are going to live beyond that and so now we need to take a
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much longer perspective their answer and somewhat credibly is that well who knows
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what's going to happen in the future we may all get covid again or we may cure
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cancer and live to be 2,000 but the point is if you're putting in place one of the biggest government expenditure
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programs in the world and you're not making long-term projections then you really have a hard time making tweaks as
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you go along and as the world changes so future Focus I think is really one of the bigger more difficult things to
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convey so one of the things that I have appreciated about the way you have navigated your career at Wharton is that
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you've been very engaged with the public sector you've been very engaged with the
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corporate sector uh including TIAA can you tell us a little bit about the work that you've done or the
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partnership that you've created with Tia so Tia has been an amazing supporter of
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the pension research Council I've actually been a participant in Tia since I was 25 years old so I'm a long-term
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supporter one of the reasons that I think it's such an interesting partner is that they are not only interested you
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know seriously doing a good job providing people with retirement saving and payouts but they're also devoted to
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the research and um way back when the pens research Council published a book that its CEO uh had written called it's
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my retirement money take good care of it and we've consistently partnered with
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their various people through the years so over about the last eight years Tia and the pension research Council have
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combined forces to issue calls for proposals to any researcher in the US at a government nonprofit or academic
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institution we've sponsored numerous different research studies including I'm
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happy to say some of mine one of their very interesting products that they provide is something called a
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participating annuity no other us company has these because it was allowed by Congress back in the Stone Age and
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essentially what this is is it's an insurance product which guarantees you a
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payout the rest of your life no matter how long or short you live but the insurance company doesn't have
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to bear the risk of surprises to the mortality table so if all of a sudden everybody lives 10 years longer or covid
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comes along the participants in the pool share that risk so what it means is their product is much less expensive
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than any other annuity on the market it's quite prevalent in Europe you see it elsewhere how can we do better
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integrating lifetime income streams in into the 401K world the Define contribution world so I'd like to switch
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gears a little bit and talk about your time specifically at Wharton you've been
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here for 30 years how have you seen the school evolve in that time particularly with respect to the department that
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you're in and the nature of the research and the students over those 30 years
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when I would joined Wharton I joined a department called the department of insurance and risk management and my
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predecessor Dan McGill had founded the pension research Council to bring greater knowledge and integration into
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the field of Retirement Research so he brought in actuaries he brought in Insurance folk um when I came in the
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world had changed somewhat instead of everybody having defined benefit pensions like in the Auto industry and
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um so forth which was the old Norm the new Norm is Define contribution plan so I broadened our perspective to be able
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to include plan design discussions uh studies of participant behavior and so forth and now I'm
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delighted to say we've celebrated our 70th Anniversary for the pension research Council I have a wonderful
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Advisory Board many of them Warton grads I'm happy to say and the nice conversation we have within our board
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spans academic and Industry and policy problems and issues and challenges so it's a great way for me as a faculty
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member in our academic colleagues to get grounded to really say what's coming up
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what's the ne Next Issue how can we help policy makers solve some of the problems
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and Industry as well and I think it's very opportun to say in this world of global aging I am excited to see what
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the pension research Council can accomplish in the next 70 years so as we think about the future uh I want to
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again sort of ground Us in the Wharton context or actually higher education and Academia in general as a senior
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stateswoman in your field and as a senior uh scholar what advice do you have for
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future current and future young scholars in this field I see the area of Pensions
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or retirement as a microcosm of almost everything it's got consumer Behavior
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it's got industry structure it's got macro and microeconomics it's got
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psychology and so when I first started down this path there was some discouragement because it was so
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multidisciplinary and that's often something that in the rest of the world in other academic institutions is
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frowned on one of the great things about Wharton is it does encourage multidisciplinary research and
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collaboration and so that's been wonderful of course good scholarship of any type Demands a strong foundation so
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um I always tell my students do what's difficult when you're in school because
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you have to force your I did have to force myself to really learn statistics and econometrics and the things that I
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couldn't sit down with a book under a tree and read and learn and then with that edifice you can do all sorts of
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things the rest of your life so on top of that strong foundation in my field it would be finance and economics and
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econometrics and statistics I think it's also important to read widely and talk
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to people so understanding that we're all different our Solutions are different our problems are very similar
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um but we can learn from each other and that has been a real Joy here at Warden wonderful so one of the first actually
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the first person that we interviewed for this series what I've learned was Anita
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Summers she was one of the first uh female faculty members at the Wharton School in economics and policy and and
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she talked about the experience early in her career of being a woman in a field that was not necessarily considered to
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be the domain of women have you found any challenge either earlier on in your career or in modern day of studying this
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or unique things that you bring to the understanding of this field because of your gender well my mother actually um
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applied to a PhD program at Harvard in economics and the only reason they let her in is she agreed to type the
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department Chairman's papers so you know that goes back um I think sure 30 40 years ago I would be in
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a room with a hundred other economists and I'd be the only female I would say
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that being in a school with yourself as Dean with very prominent women that was what attracted
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me to Wharton actually when I did make the move um there were very strong women presidents of Penn over the years um and
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that makes a difference it makes the environment more more friendly of course over the years um one also figures out
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how to speak and wh whom to speak with and what top and when to speak that's
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the most important thing um but I believe that it's been a very nurturing environment and it continues to be so
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and so for that I thank you and your predecessors that have done such a great job it is an incredible culture here at
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the Wharton School so final question this series is called what I've learned
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oh so if we were to end with your greatest piece of advice uh with what you've learned over the years what would
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that be and it may not have have anything to do with pension research I would say just don't give up in fact my
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dearly departed mother used to say overcome dear overcome and um that that Mantra really stands what in good stead
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I had a number of brilliant friends and co-students in graduate school some of whom never went anywhere because they
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got discouraged they got a rejection letter from a journal and put it in the drawer and never looked at it again um
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and it's not like we haven't had our challenges over the the years but um
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usually there's a different path if you can't go over over it or under it go
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around it and that's the advice I try to give my students I also try to tell them
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try to think of questions such that no matter what the answer is it's always
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interesting so you know you don't want to say is X true and then find out it's
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not and then what do you do you want to say why is X true or not true or what can I learn from that so part of what I
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try to do in teaching is try to help people ask interesting questions well Olivia I've learned a lot
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from you and I know that you have generations of students who have benefited from your engagement with them
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in the classroom and we're really thrilled that you have chosen Wharton to be your academic home and will continue
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to be here hopefully for quite some time thank you so so much for joining us thank you ma'am it's a pleasure