The decision on when to start collecting it comes along only once in your life. Theres no learning curve on Social Security, either. People are often present-biased they favor getting something right now at the expense of the future, Burke explains. And then theres the sheer impossibility of accurately forecasting the future. Burke says its a classic tradeoff problem: People struggle to weigh a benefit today against a benefit in the future.įirst, the math might be too complex to grasp. Its this uncertainty about the future that often poses a big stumbling block to decision-making. Do it at age 62 and you get less per month than if you wait until age 70.Īnd yet, even though a person who claims Social Security at 70 will get more money per month than at 62, that older person probably will have fewer years to live. The problem has led some experts to warn of a coming retirement crisis, as retirees who look solely to Social Security for support are in danger of living their golden years below the poverty line.įor those already approaching retirement, Kapteyn says, one of the toughest decisions to make is when to claim Social Security benefits. For some, planning for tomorrow seems so overwhelming that its easier to focus on today. Low take-home pay and vanishing company pensions are part of the problem, but researchers say its also partly because people cant relate to their future selves so they dont save money. Nearly half of American adults havent started saving for it, even those whose age and experience puts them at their mental peak. Take the major financial life decisions that surround retirement. Its against that backdrop that people face some of their most challenging questions. So we may have more information to work with as we get older, but the mental motor that processes that information slows down. At the same time, the knowledge gained from life experience increases over time until it plateaus late in life, Burke says. Humans raw cognitive horsepower declines with age. The factors behind our abilityor inability to make better decisions move in opposite directions as we age, say Kapteyn and Jeremy Burke, a senior economist who runs CESRs satellite office in Washington, D.C. In one way or another, we all need help. ∿or most people, decisions happen largely by accident, Kapteyn says. But for Kapteyn, as for the rest of us, putting knowledge into action is another story. He has devoted most of his professional life to researching why its so tough to get people to make important financial decisions and the impact such indecision has on society and public policy. By most measures, Kapteyn, CESRs director, is an expert in making informed choices. Ive not planned my life out yet, says economist Arie Kapteyn, 72, with a laugh. If youve procrastinated on life-changing plans and choices like how much money to save or whether to undergo a major medical procedure youre not alone. Turns out, humans are poor at weighing options and making big decisions. To do that, the researchers tap the latest technology to make sense of large volumes of data. The economists, psychologists, behavioral scientists and demographers at CESR figure out how people make the decisions they make and how they can make better, more-informed ones. Thats because the 70 or so researchers at the center in Dauterive Hall specialize in the science of making decisions. Generations have thought of questions to ask and then shaken the spheres for answers, getting such responses as It is certain, Outlook not so good or ∼oncentrate and ask again.īut at the center dubbed CESR (pronounced like the Roman politician and general), the Magic 8-Ball feels more tongue-in-cheek than nostalgic. Anywhere else, it might elicit childhood memories. The iconic ∥0s toy sits on an office desk at USCs Center for Economic and Social Research. Its an unexpected home for a Magic 8-Ball.
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