finances

Researchers from the MIT AgeLab and Transamerica have found that individuals ages 40 to 59 are more likely to struggle with preparing for increased longevity, reports Lorie Konish for CNBC. “The research finds while 74% of people in their 50s say it is extremely or very important to save enough money to eventually stop working, just 57% said they expect to be able to retire,” writes Konish. “Moreover, half of people in midlife are struggling to get by financially, more than other age groups studied.”

A new working paper by Prof. Christian Wolf and his colleagues explores a “mechanism by which a government could run deficits and never have to pay them,” reports Peter Coy for The New York Times. The researchers found that “‘deficits contribute to their own financing via two channels.’ First, they can accelerate economic growth, which generates more tax revenue. Second, they can cause inflation to rise, which shrinks the effective cost of debt.

Writing for Forbes, Joseph Coughlin, director of the MIT AgeLab, emphasizes the importance of including climate change as part of retirement planning. “Preparing for possible conditions and costs of climate change should now be part of our retirement plan,” writes Coughlin.

As part of a SHOOKtalks session, Joseph Coughlin, director of the AgeLab, discusses how the pandemic has altered the way financial advisors work with clients, reports R.J. Shook for Forbes.  “The one thing COVID did is it pushed technology into our lives,” says Coughlin. “It is not a novelty. COVID showed us that technology actually adds new value.”

Writing for Forbes, research affiliate Thomas Davenport examines the feasibility of robot taxation based on a debate at MIT Technology Review’s Emtech Next conference. “At some point we may need to replace the tax revenue from human jobs lost to automation,” writes Daveport. “If that day ever comes, I hope that the tax revenues issue is the most critical one we have to deal with.”

An MIT AgeLab survey finds that many Americans have unrealistic expectations for retirement, writes Richard Eisenberg for Forbes. Research scientist Chaiwoo Lee suggests that financial advisers use the survey results to “create messages and images and materials for potential clients and provide clients with a better education about life after career.”

Research co-authored by Prof. Christopher Palmer in Sloan found that loan rates vary substantially, even when two borrowers are relatively similar, due primarily to the variations in the lender’s markup. “You would never get away with this if you were selling milk,” Palmer told Jo Craven McGinty of The Wall Street Journal. “It would be the same price for everyone.”

A study co-authored by Visiting Assistant Prof. Maria Loumioti finds that male bonding between loan officers and customers often leads to poor loan outcomes, reports Suzanne Woolley for Bloomberg. This feeling of common identity creates a sense of trust simply because “you identify yourself through this bond,” says Loumioti.  

Sloan Senior Lecturer Robert Pozen speaks to Matt Miller of Bloomberg Markets about the risks associated with investing in junk bonds and emerging market bonds with potential interest rate hikes. “If the Fed raised interest rates the U.S. dollar would go up, it would hurt these currencies in the emerging markets,” Pozen explains.

A study by Prof. Antoinette Schoar finds that hiring a CEO whose first job was during a recession can help boost a company’s shares, writes Alina Dizik for The Wall Street Journal. The researchers found a close connection between “starting one’s career in a recession and developing a reputation as a conservative, low-risk manager.”

Writing for the Financial Times, senior lecturer Robert Pozen explores how the retirement health care plans offered to the employees of many U.S. cities and states could pose budgetary problems. Pozen writes that the "unfunded liabilities for retirement healthcare could bust the budgets of many cities and states over the next decade."

In an article for The New York Times, Prof. Simon Johnson questions the ability of U.S. banks to weather another recession. Johnson writes that he thinks the U.S. should require our largest banks “to have a great deal more equity so they could absorb more of their own losses, and not dump them…on the public.”

Financial Times reporter Tim Harford writes about the Billion Prices Project, which was started by Profs. Alberto Cavallo and Roberto Rigobon in an effort to better understand inflation by gathering price data from online retailers. Harford writes that the project’s “approach to inflation is also helping us to understand the fundamental question of why recessions happen.”

NPR reporter Michelle Andrews writes about a new paper, co-authored by Prof. Andrew Lo, that proposes developing health care installment loans to help patients access treatments that are prohibitively expensive. Lo explains that the loans are a "private sector stopgap way to deal with” the high prices of certain medications. 

In an article for The New York Times, Nelson Schwartz highlights Prof. Duncan Simester’s study examining whether people spend more money when they are using a credit card. Simester notes that, “when you vary the payment method, people are willing to pay more. You’re not forking over a dollar bill, so there is less sensation of loss.”