Enhancing Risk Management for an Aging World

Abstract

As the world confronts unprecedented global aging, academics and policymakers are growing increasingly aware of the need for better risk management tools to handle the demographic transition. It is therefore imperative to identify innovative insurance and financial market products that can enrich the range of options for households, firms, and governments facing the challenge of an aging population. After outlining thoughts on how rising longevity might shape financial markets, we discuss opportunities for the finance and insurance industries in this arena. We also highlight how policymakers could respond to improve efforts to better manage risk.

How Cognitive Ability and Financial Literacy Shape the Demand for Financial Advice at Older Ages

“…Nevertheless, shifting the risks of saving too little, investing poorly, and outliving assets to individuals does not make such risks disappear. Additiona lly, there is growing evidence that retail investors have a difficult time setting spending goals, paying debt, deciding how much and where to invest, determining when to stop working and claim their retirement benefits, and handling insurance needs (e.g., Brüine de Bruin, 2017;Mitchell, 2018). Financial disintermediation poses an even larger challenge when a large segment of the older population lacks financial sophistication (c.f., Finke, Howe, and Huston, 2016;Lusardi and Mitchell, 2014).…”