Financial decision-making for retirement: when we choose not to choose
Latest research from the MBS Orford Initiative finds that, when faced with a simple retirement savings allocation task, older Australians are willing to engage with the decision and allocate their retirements savings across a few products. However, when they are presented with more detailed and complex information about product attributes (in this case annuities), they choose not to choose.
Consumers may disengage because they are overwhelmed by the amount of information, are fearful of making the wrong decision, or don’t fully understand all of the jargon. The industry needs to help older Australians more by simplifying product messaging (within regulatory boundaries) so that people do not decide to just walk away.
Read more about the Orford initiative here
From this event
Join the MBS Orford Initiative research team as they share findings from 2 latest experiments with over 1000 older Australians, including:
- The ‘rule of 3’ - older consumers typically spread savings across 3 options (i.e. some in an account-based pension, some as cash in the bank and some in a lifetime annuity). In this way consumers spread the risk and hedge their bets.
- When presented with a more complex decision-making task, almost 40% of respondents selected the ‘no choice’ option nearly every time with a further 42% making the decision not to choose a product over half the time.
- Women and those with a lower sense of financial well-being are more likely to select ‘no choice’ – this is concerning because these groups are also at greater risk of dying in poverty and also living more frugally and reducing the quality of their life in retirement. Choosing not to choose is the worst decision a consumer can make.