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[Music]
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Olivia welcome I'm so so excited to talk
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with you about your research but before
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we get into your research I'm very eager
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to learn about you your background your
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journey to Wharton and how let us get to
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know you the person before we get to
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dive in to you the professional well
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it's a great pleasure to be with you and
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thank you Erica for all you do for the
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school and the world I was really doomed
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to become an economist both of my
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parents are economists or were they've
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now passed and over the kitchen table in
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our house there was a clock which read
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time is money so with that in my
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environment what else could I do but
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become an economist so I went to high
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school in Lima Peru in Santiago Chile my
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father was posted there as a diplomat
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and and um after that I taught
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kindergarten decided that wasn't my cup
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of tea and then I went on to teach
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literacy to the slum dwellers that lived
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around Lima who didn't know how to read
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and therefore couldn't even take a bus
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because they didn't know what it said on
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the bus when I went to college in the US
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I continued working on development
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topics um I wrote a senior thesis on uh
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the difficulties and challenges of
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worker self-managed firms in Peru then I
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went on to graduate school where I
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decided to diversify a little bit and
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start to study Public
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Finance and um my first job right out of
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school was teaching at Cornell
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University where my department chair
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said to me please teach a course on
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pensions and health insurance well I was
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25 years old I had no clue so I read the
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book quickly and I thought this is an
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interesting topic then I came to Wharton
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hired to continue studying pensions and
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issues of retirement security and here I
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am I've never deviated from that path
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did you always know that you were going
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to pursue a career in Academia no I had
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no idea I was going to become an
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academic I always had a five-year plan
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so when I finished graduate school I
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interviewed with the World Bank of the
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Foreign Service some other companies and
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I thought well I'll give it five years
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in Academia and then another five and
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here I am 41 years later still say I'll
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give it another five uh and so you've
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been at Wharton for how long 30 years
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and um it's been terrific I was brought
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in to work on directing the pension
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research Council uh but I've also been
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teaching I teach a course now um open to
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all undergraduates at Penn called con
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consumer financial decision making and
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it's all about the kinds of things you
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need to know as an adult moving into the
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financial world and you created that
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course Nick rusanov and I created it
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it's always completely booked up it's a
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ton of fun and the students write to me
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later saying oh can you help me with my
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401k
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Choice things like that so other than
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retirement planning what are some of the
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other consumer choices that you discuss
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in the class oh we talked about
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everything from student loans whether
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you should rent or buy a car take a
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lease or buy a car whether credit card
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problems whether you should pay only the
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minimum every month which too many
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people do and then we go through the
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life cycle so at some point you might
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think about trying to buy a house or an
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apartment at some point you probably
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early you should think about disability
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insurance life insurance starting a
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family um all the things that get 529
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plans that are tied up with that and
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then of course we need to think about
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saving for retirement from a very young
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age because if you don't you're going to
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not wish that you had a little bit later
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well let's dive into your research a
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little bit I want to take it back to the
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beginning because your research actually
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as you've illuminated spans decades and
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covers a variety of different topics in
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both finance and economics what Drew you
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to those topics I know you said you were
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doomed to study stud but what was it
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about that those fields that resonated
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with you so much well I got involved
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back in
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1992 with a uh great study called the
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health and retirement survey and this is
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a dashly representative study of people
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over the age of 50 financed by the
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National Institute on aging and we
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surveyed 20,000 people every two years
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from when they enter until they pass
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away and we also have merged with their
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permission their Social Security
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earnings records benefit records
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Medicare records and so forth so we can
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see what are the factors driving their
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retirement saving when they claim their
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benefits and what happens to them in
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later Life along the way I decided to
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launch a short module on financial
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literacy trying to find out answers to
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very simple questions one on inflation
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one on interest rates and one on risk
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diversification and I was shocked to
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find out that fewer than half of the
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older American population 50 and over
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could answer all three questions right
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so if they can't do that how are they
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going to decide if they've saved enough
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or invested enough or maybe they'll
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withdraw their money too quickly from
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their retirement pot in in later life so
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that led to a a big effort to try to
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enhance financial literacy our survey
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has now been delivered in over 150
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countries it's part of the high school
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test that they do in Europe to examine
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students financial literacy and it's
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just been a fascinating effort that is
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um again so important done reflecting
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all of the things that I didn't know
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when I was coming of age and even into
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adulthood until it's almost too late to
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make good
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choices your research Del was into the
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intersection of Behavioral economics and
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retirement planning so tell us more how
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you think about be the concept of
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Behavioral economics and what does that
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actually mean well the whole behavioral
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area has been one of enormous growth
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over the past 20 years um and as it
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pertains particularly to the retirement
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age plus population what I focused on is
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the kinds of things that people don't
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know about their own future life
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livelihoods so um in one very
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interesting example a colleague from
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Microsoft research showed people a
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picture of their current face and then
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with software aged the face and there
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was a slider button at the bottom and as
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you slid the button to the right you
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save more for retirement the face at the
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right your future self became happier
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and happier as you slid the slider to
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the left the current phase became very
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cheerful and the the guy on the right
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was morose and so this is the kind of
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thing that you realize people need to
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visualize their future selves and in
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fact I've recently been talking to
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people about trying to design an avatar
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to try to go through alternative
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retirement scenarios to get a sense of
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what it would be like if I didn't save
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what would happen if I quit like my
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daughter wanted to at age 45 and retire
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and so on and I think that really is
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helpful and it's it teaches us the kinds
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of Behavioral obstacles people face when
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they try to visualize themselves in the
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future so as I get closer and closer to
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retirement we hope not not not anytime
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soon but every year I'm closer and
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closer I think about you know it
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sometimes it can be daunting to think
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about all of the options and all the
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considerations and because for most of
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us it's not something that we were
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taught earlier in life do you find that
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as you're interacting with people of
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different Dem
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graic ages that they are either more or
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less receptive to learning and changing
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behaviors in a way that would prepare
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them for their future retirement well
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one of the things we've been looking at
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recently is the concept of longevity
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risk not only people not have to have a
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sense of on average how long they'll
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live but also what's the tail of the
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distribution what are the chances you'll
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survived to 85 995 105 and so forth and
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so what we see is there are big
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differences demographic differences
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interestingly enough in the US the black
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population seems to think it will live
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longer than it will given the objective
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survival table women tend to
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underestimate how long they will live so
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all those factors shape how much you
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save whether you claim your Social
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Security benefits too early and whether
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you spend your money too quickly and run
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out of money in later life so what we've
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been doing is trying to come up with
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simple
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explanations did you realize someone a
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male let's say 65 has a 35% chance of
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living to age 90 and higher for women
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and that kind of very simple explanation
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actually gets people to step and say oh
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number one I regret I didn't save enough
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number two I regret claiming my social
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security benefits too early and number
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three I wish I had bought long-term care
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insurance and an annuity so there are
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ways that we're trying to bring these
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subjects to people in a way that makes
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it very concrete and very individual and
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helps them make better financial
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decisions your work has influenced
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policy decisions globally can you share
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particular instances where your research
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directly impacted retirement policies
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either here or somewhere outside of the
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US and how did it shape your Notions for
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what to study going forward I had the
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Good Fortune to work on President George
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W Bush's commission to strengthen Social
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Security this was 20 plus years ago it
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was a bipartisan commission eight
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democraty Republicans co-chaired by
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Senator Daniel Patrick boan and Richard
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Parsons and it was an
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amazingly wonderful group hardworking
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really devoted to try to help fix Social
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Security before we reach the situation
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we're in now um so we had a good plan
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which was basically to reduce the growth
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rate of benefits but not cut benefits
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and then the second piece was to allow
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people if they wanted to set aside part
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of their social security taxes in a
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personal account long and short of it
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due to political opposition and also the
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fact that that year was
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911 the plan was dead in the water
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it's currently estimated that Social
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Security will become insolvent by
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2033 and Medicare as well shortly
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thereafter and at that point the
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benefits will have to be cut by 25 to
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30% for everybody or taxes will have to
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be increased by about 30% around the
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world the issue is very consistent
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populations are aging fertility rates
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are declining and so there simply isn't
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the
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demographic mass of workers that can
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help support people in later life to the
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extent that they become accustom and
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people are living longer and people are
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living longer exactly so what that says
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to me is that we're all going to have to
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work a lot longer it's not a popular
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View and especially in countries like
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France where the the prospect of raising
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the retirement age from 62 to 64 and
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Drew out math demonstration in the
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street I'm curious whether you think AI
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has any influence or any role to play in
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the future of well very interesting
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topic everyone is obviously speculating
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like crazy I do think that artificial
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intelligence can help us do a better job
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tailoring our our life cycle saving and
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investment and withdrawal profile uh
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right now the in the US at least we tend
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to have
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one siiz fits-all Solutions so Target
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date funds are very popular in
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retirement plan they say okay how old
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are you what's the year you're going to
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turn 65 boom we're going to put you in
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that Target date fund and the rest is is
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not necessary to be discussed but
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obviously people are different right now
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if you put in simple questions to AI you
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know they tell you well 6040 is a good
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stock Bond allocation it's still very
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simple
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so there's some and the other problem is
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that at the payout phase things get much
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more complicated so there's progress
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there's
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optimism um and I can't wait to see what
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happens I think that's true for for many
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of this what do you find has been the
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most challenging thing to convey to
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either organizations or to individuals
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to help them understand the urgency of
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of needing to find solutions for our
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current problems with the pension and
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social security
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systems probably the most difficult
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concept is a deepr rooted one which is
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that people simply have a hard time
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thinking into the
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future way back when when I started
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working with the Social Security
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Administration they only used a 10-year
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projection period to see if the system
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was solvent well 10 years years is
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nothing for people that are just
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starting their work lives or even age 55
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or 60 so over time Congress induced
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Social Security to take a 75-year window
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so now they do their Pro projections for
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that period and their their logic is
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that well the baby born today will
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probably live to age 75 but there are a
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lot of more babies who are going to live
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beyond that and so now we need to take a
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much longer perspective their answer and
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somewhat credibly is that well who knows
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what's going to happen in the future we
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may all get covid again or we may cure
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cancer and live to be 2,000 but the
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point is if you're putting in place one
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of the biggest government expenditure
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programs in the world and you're not
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making long-term projections then you
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really have a hard time making tweaks as
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you go along and as the world changes so
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future Focus I think is really one of
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the bigger more difficult things to
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convey so one of the things that I have
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appreciated about the way you have
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navigated your career at Wharton is that
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you've been very engaged with the public
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sector you've been very engaged with the
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corporate sector uh including
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TIAA can you tell us a little bit about
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the work that you've done or the
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partnership that you've created with Tia
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so Tia has been an amazing supporter of
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the pension research Council I've
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actually been a participant in Tia since
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I was 25 years old so I'm a long-term
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supporter one of the reasons that I
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think it's such an interesting partner
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is that they are not only interested you
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know seriously doing a good job
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providing people with retirement saving
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and payouts but they're also devoted to
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the research and um way back when the
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pens research Council published a book
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that its CEO uh had written called it's
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my retirement money take good care of it
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and we've consistently partnered with
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their various people through the years
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so over about the last eight years Tia
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and the pension research Council have
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combined forces to issue calls for
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proposals to any researcher in the US at
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a government nonprofit or academic
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institution we've sponsored numerous
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different research studies including I'm
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happy to say some of mine one of their
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very interesting products that they
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provide is something called a
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participating annuity no other us
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company has these because it was allowed
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by Congress back in the Stone Age and
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essentially what this is is it's an
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insurance product which guarantees you a
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payout the rest of your life no matter
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how long or short you live
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but the insurance company doesn't have
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to bear the risk of surprises to the
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mortality table so if all of a sudden
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everybody lives 10 years longer or covid
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comes along the participants in the pool
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share that risk so what it means is
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their product is much less expensive
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than any other annuity on the market
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it's quite prevalent in Europe you see
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it elsewhere how can we do better
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integrating lifetime income streams in
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into the 401K world the Define
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contribution world so I'd like to switch
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gears a little bit and talk about your
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time specifically at Wharton you've been
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here for 30 years how have you seen the
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school evolve in that time particularly
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with respect to the department that
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you're in and the nature of the research
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and the students over those 30 years
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when I would joined Wharton I joined a
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department called the department of
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insurance and risk management and my
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predecessor Dan McGill had founded the
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pension research Council to bring
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greater knowledge and integration into
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the field of Retirement Research so he
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brought in actuaries he brought in
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Insurance folk um when I came in the
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world had changed somewhat instead of
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everybody having defined benefit
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pensions like in the Auto industry and
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um so forth which was the old Norm the
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new Norm is Define contribution plan so
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I broadened our perspective to be able
00:19:01
to include plan design
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discussions uh studies of participant
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behavior and so forth and now I'm
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delighted to say we've celebrated our
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70th Anniversary for the pension
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research Council I have a wonderful
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Advisory Board many of them Warton grads
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I'm happy to say and the nice
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conversation we have within our board
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spans academic and Industry and policy
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problems and issues and challenges so
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it's a great way for me as a faculty
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member in our academic colleagues to get
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grounded to really say what's coming up
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what's the ne Next Issue how can we help
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policy makers solve some of the problems
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and Industry as well and I think it's
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very opportun to say in this world of
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global aging I am excited to see what
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the pension research Council can
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accomplish in the next 70 years so as we
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think about the future uh I want to
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again sort of ground Us in the Wharton
00:20:04
context or actually higher education and
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Academia in general as a senior
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stateswoman in your field and as a
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senior uh
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scholar what advice do you have for
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future current and future young scholars
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in this field I see the area of Pensions
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or retirement as a microcosm of almost
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everything it's got consumer Behavior
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it's got industry structure it's got
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macro and microeconomics it's got
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psychology and so when I first started
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down this path there was some
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discouragement because it was so
00:20:43
multidisciplinary and that's often
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something that in the rest of the world
00:20:48
in other academic institutions is
00:20:50
frowned on one of the great things about
00:20:52
Wharton is it does encourage
00:20:55
multidisciplinary research and
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collaboration and so that's been
00:21:00
wonderful of course good scholarship of
00:21:02
any type Demands a strong foundation so
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um I always tell my students do what's
00:21:09
difficult when you're in school because
00:21:12
you have to force your I did have to
00:21:14
force myself to really learn statistics
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and econometrics and the things that I
00:21:19
couldn't sit down with a book under a
00:21:21
tree and read and learn and then with
00:21:24
that edifice you can do all sorts of
00:21:27
things the rest of your life so on top
00:21:29
of that strong foundation in my field it
00:21:31
would be finance and economics and
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econometrics and statistics I think it's
00:21:36
also important to read widely and talk
00:21:40
to people so understanding that we're
00:21:43
all different our Solutions are
00:21:45
different our problems are very similar
00:21:47
um but we can learn from each other and
00:21:50
that has been a real Joy here at Warden
00:21:53
wonderful so one of the first actually
00:21:56
the first person that we interviewed for
00:21:59
this series what I've learned was Anita
00:22:01
Summers she was one of the first uh
00:22:03
female faculty members at the Wharton
00:22:05
School in economics and policy and and
00:22:09
she talked about the experience early in
00:22:12
her career of being a woman in a field
00:22:14
that was not necessarily considered to
00:22:16
be the domain of women have you found
00:22:20
any challenge either earlier on in your
00:22:23
career or in modern day of studying this
00:22:26
or unique things that you bring to the
00:22:29
understanding of this field because of
00:22:30
your gender well my mother actually um
00:22:34
applied to a PhD program at Harvard in
00:22:37
economics and the only reason they let
00:22:39
her in is she agreed to type the
00:22:41
department Chairman's
00:22:43
papers so you know that goes back um I
00:22:47
think sure 30 40 years ago I would be in
00:22:50
a room with a hundred other economists
00:22:53
and I'd be the only female I would say
00:22:56
that being in a school
00:22:59
with yourself as Dean with very
00:23:01
prominent women that was what attracted
00:23:03
me to Wharton actually when I did make
00:23:06
the move um there were very strong women
00:23:09
presidents of Penn over the years um and
00:23:13
that makes a difference it makes the
00:23:15
environment more more friendly of course
00:23:17
over the years um one also figures out
00:23:21
how to speak and wh whom to speak with
00:23:24
and what top and when to speak that's
00:23:26
the most important thing um but I
00:23:30
believe that it's been a very nurturing
00:23:32
environment and it continues to be so
00:23:35
and so for that I thank you and your
00:23:37
predecessors that have done such a great
00:23:39
job it is an incredible culture here at
00:23:42
the Wharton School so final question
00:23:44
this series is called what I've learned
00:23:47
oh so if we were to end with your
00:23:50
greatest piece of advice uh with what
00:23:53
you've learned over the years what would
00:23:56
that be and it may not have have
00:23:58
anything to do with pension research I
00:24:00
would say just don't give up in fact my
00:24:04
dearly departed mother used to say
00:24:06
overcome dear overcome and um that that
00:24:11
Mantra really stands what in good stead
00:24:14
I had a number of brilliant friends and
00:24:17
co-students in graduate school some of
00:24:20
whom never went anywhere because they
00:24:22
got discouraged they got a rejection
00:24:25
letter from a journal and put it in the
00:24:27
drawer and never looked at it again um
00:24:31
and it's not like we haven't had our
00:24:32
challenges over the the years but um
00:24:36
usually there's a different path if you
00:24:38
can't go over over it or under it go
00:24:40
around it and that's the advice I try to
00:24:43
give my students I also try to tell them
00:24:47
try to think of questions such that no
00:24:50
matter what the answer is it's always
00:24:52
interesting so you know you don't want
00:24:54
to say is X true and then find out it's
00:24:57
not and then what do you do you want to
00:24:58
say why is X true or not true or what
00:25:01
can I learn from that so part of what I
00:25:05
try to do in teaching is try to help
00:25:07
people ask interesting
00:25:10
questions well Olivia I've learned a lot
00:25:13
from you and I know that you have
00:25:15
generations of students who have
00:25:17
benefited from your engagement with them
00:25:20
in the classroom and we're really
00:25:21
thrilled that you have chosen Wharton to
00:25:23
be your academic home and will continue
00:25:25
to be here hopefully for quite some time
00:25:27
thank you so so much for joining us
00:25:29
thank you ma'am it's a pleasure
