2024/01/30: Examining US Millennial Retirement Plan Participation Decisions: The Roles of Employer Contributions and Automatic Enrollment
Authors:
Thomas Korankye; Blain Pearson; Yi Liu.
Journal
Journal of Risk and Financial Management
Publish date
2024/01/30
Publisher
MDPI
Description
This study examines how automatic enrollment and employer contribution provisions relate to the retirement plan participation decisions of Millennials using data from the 2018 U.S. Financial Industry Regulatory Authority’s (FINRA) Millennial Investment Study. The analysis controls for various factors such as total debt, household income, risk tolerance, and investable assets. The findings underscore the notion that automatic enrollment and employer contribution provisions are associated with an increased likelihood of participation in retirement plans among Millennials. The empirical results reveal that the absence of auto-enrollment, lack of employer-matching contributions, or communication inadequacies are fundamental reasons for Millennials’ non-participation in employer retirement plans. These findings have important implications for employer retirement plan design and the effectiveness of their communication strategies. Link To Article
2024/1/1 The Retirement Consumption Puzzle: A Mental Accounting Explanation.
Authors
Pearson, Blain; Korankye, Thomas; Qing, Di
Academic Journal
Journal of Financial Counseling & Planning
Publication Date
2024/1/1
Publisher
Association for Financial Counseling and Planning Education (AFCPE).
Description
Recent developments in cognitive psychology and behavioral economics may explain the lower-than-predicted asset decumulation behavior posited by traditional life-cycle models during retirement, dubbed the retirement consumption puzzle. This study examines if mental accounting could be used to explain the retirement consumption puzzle. Utilizing panel data collected from the 1992–2018 Health and Retirement Studies, retiree age and age squared are examined using fractional polynomials and fixed effects regressions for their associations with varying categorical retiree asset decumulation patterns, including retiree wealth, nonhousing wealth, stocks, retirement accounts, bonds, liquid assets, vehicles, primary residence, and home equity. The results suggest that varying asset decumulation behaviors exist among retirees, which could be explained by retirees’ discretionary spending propensities. The discussion highlights the importance of understanding retiree behavioral spending constraints to allow for smooth consumption paths. Link to article
2023/11/29: Student loan debt in retirement: identifying the correlates and implications for policy, practice and research
Authors
Thomas Korankye
Journal
Managerial Finance
Publication Date
2023/29
Publisher
Emerald Publishing Limited
Description
Purpose
Research shows that having student loan debt in retirement is associated negatively with life satisfaction, suggesting that student debt is a bane of retiree well-being. The rationale for this study is to determine the factors related to owing student debt in retirement, given the adverse effects on the well-being of retired households.
Design/methodology/approach
The study utilizes pooled cross-sectional data from the 2015 and 2018 U.S. National Financial Capability Study. The empirical analysis uses a sample of retired Americans aged 65 years and older (N = approximately 8,000) and estimates two-block logistic regression models to examine the effects of demographic, socioeconomic and behavioral factors on student loan indebtedness in retirement. A sensitivity analysis is performed for the subsample of retirees holding student debt for their children’s education. Statistical interpretations use odds ratios.
Findings
The findings indicate that financial literacy, age, homeownership and high subjective financial knowledge are associated with a low likelihood of holding student loan debt in retirement. However, being Black, having postsecondary education, having difficulty covering expenses, having financially dependent children, having high-risk preferences and spending more than income increase the likelihood of holding student debt in retirement. The ensuing discussion will assist financial planners and educators identify practical ways to shape decisions regarding student loan debt in retirement.
Research limitations/implications
The amount of student loan debt is unavailable in the dataset for analysis. One cannot infer causal relations from the study. The factors examined do not reflect the time the student loan was obtained.
Originality/value
The study focuses on the determinants of student loan indebtedness among retired Americans rather than young adults or older adults on the verge of retirement. The paper enhances the understanding of student loan holdings in the decumulation phase of the life cycle. Many US individuals have low retirement savings from which they draw a retirement income. The more the student debt burdens on retired Americans, the greater the likelihood of outliving their resources and experiencing poverty.
2023/10/20: Retirement Planning, Retirement Insecurity, and Financial Satisfaction
Title
Retirement Planning, Retirement Insecurity, and Financial Satisfaction
Authors
Blain Pearson, Thomas Korankye, Yi Liu
Journal
The Journal of Retirement
Publication Date
2023/10/20
Publisher
Portfolio Management Research
Description
This study examines retirement planning prior to retirement and its association with retirement insecurity and financial satisfaction using a fully retired sample from the U.S. National Financial Capability Study. The findings suggest that, when compared to retirees who did not complete a retirement plan prior to retirement, retirees who completed a retirement plan are less likely to experience retirement insecurity and are more likely to experience higher levels of financial satisfaction during retirement. The ensuing discussion highlights the need for retirement planning engagement prior to retirement and outlines useful interventions for policymakers, retirement planning stakeholders, and financial planning professionals.
2023/10/17: Personality Traits and Student Loan Holding for Self and for Children Among Baby Boomers
Authors
Yi Liu, Thomas Korankye, Blain Pearson
Journal
Journal of Financial Counseling and Planning
Publisher
Springer
Description
This study investigates the relationship between baby boomers’ personality traits and their student loan indebtedness in the United States. This article utilizes the 2014 data set from the 1979 cohort of the U.S. National Longitudinal Survey of Youth, applies survey weights, estimates multiple probit models, and computes marginal effects. The results reveal that those with greater openness are more likely to have student loans for themselves, while those with greater neuroticism are less likely to have student loans for themselves and for their children. Additional analyses based on core/trailing boomer status, gender, and income subsamples show the differing roles of each personality trait on student loan indebtedness. The findings build upon the literature by providing evidence that personality is significantly associated with student loan indebtedness and that this relationship is robust to translate into student debt management behavior.
2023/7/20: Student loan debt and US married households’ stock investment decisions
Authors
Thomas Korankye
Journal
Economic Analysis Letters
Volume 2, Issue 4, Pages 13-18
Description
This study aims to examine the effects of student loan debt on the decisions of US married households to invest in stocks located in non-retirement accounts. Using longitudinal datasets from the 2011 to 2017 US Panel Study of Income Dynamics and a fixed effects logit model, the results show mixed findings. The presence of student debt decreases the probability that married households will own stocks, but the amount of student debt does not show a statistically significant effect. The findings suggest that the incidence of student debt raises the perception of liquidity constraints and debt burden among married households.
2023/4/18: Financial Advice Use and Saving for Children’s College Education: A Propensity Score Matching Approach
Authors
Thomas Korankye, Blain Pearson, Hossein Salehi
Journal
Journal of Financial Counseling and Planning
Volume 34, Issue 1, Pages 96-111
Publisher
Springer
Description
This study examines the effects of financial advice on college-saving decisions using data sets from the 2009 and 2012 U.S. National Financial Capability Study. After controlling for self-selection bias through propensity score matching, the findings show that receiving financial advice is associated positively with the likelihood of saving for children’s college education. Other findings reveal that seeking specific types of financial advice relating to savings/investment, insurance, and tax planning is positively associated with a household’s decision to allocate money for their children’s postsecondary education. The ensuing discussion highlights that policies incentivizing households to seek financial advice could promote college savings and contribute to reduction in student loan dependence.
2023/3: Comparative Advantage in the Household: Should One Person Specialize in a Household’s Financial Matters?
Authors
Blain Pearson, Thomas Korankye, Hossein Salehi
Journal
Journal of Family and Economic Issues
Volume 44, Issue 1, Pages 114-124
Publisher
Springer US
Description
This study examines if households experience utility gains by selecting one of its members to specialize in its financial management. Utilizing data that are collected from the Health and Retirement Study, a variable measuring households’ level of financial specialization (HFS) is first constructed. The HFS variable is examined for its association with household utility, measured in this study as financial satisfaction, income satisfaction, and life satisfaction. The evidence provided strongly indicates that a household that selects one of its members to specialize in its financial management experiences utility gains.
2023/2/16: Managing Household Finances: How Engaging in Financial Management Activities Relates to the Experiential Well-Being of Americans
Authors
Thomas Korankye, Blain Pearson
Journal
Journal of Risk and Financial Management
Volume 44, Issue 1, Pages 114-124
Publisher
MDPI
Description
This study examines how engagement in financial management activities influences well-being using nationally representative data (N = approximately 30,000) from the U.S. Bureau of Labor Statistics’ American Time Use Survey and its associated Well-Being Modules. The current study estimates ordered probit models for several measures of experiential well-being, which consider how meaningful an activity is for a household and how happy, sad, tired, in pain, and stressed respondents felt during the activity. Controlling for a standard set of demographic and socioeconomic factors, the econometric results indicate that households report lower utility gains (lower happiness, greater sadness, and higher stress) when engaging in financial management activities relative to other activities. Furthermore, the results suggest increases in household time allocated toward performing financial management activities is associated with a lower (higher) likelihood of being very happy (very stressed) compared to other activities. The findings strongly indicate that households perceive financial management activities as vexing, reinforcing the need for financial stewardship support to promote household well-being.
2023/1/26: The nexus between investor sophistication and annuity insurance ownership: evidence from FINRA’s National Financial Capability Study
Authors
Thomas Korankye, Blain Pearson, Hossein Salehi
Journal
Managerial Finance
Volume 49, Issue 2, Pages 398-419
Publisher
Emerald Publishing Limited
Description
Purpose:
Although annuitization provides insurance against longevity risk that can benefit households, researchers have uncovered an annuitization puzzle, which suggests households are reluctant to annuitize their wealth. This study contributes to the discussions on the annuitization puzzle by examining investor sophistication and owning annuities in non-retirement accounts.
Design/methodology/approach:
The study utilizes data from the 2018 U S National Financial Capability Study (NFCS). The empirical analyses are based on logistic regression estimates of annuity ownership on investor sophistication. Interpretations are based on odds ratios.
Findings:
The findings indicate that investor sophistication contributes to the annuity puzzle. Investors with low objective and high subjective investment knowledge (overconfident investors) are more likely to own annuities compared to those with low objective and low subjective investment knowledge. However, investors with high objective and low subjective investment knowledge (under-confident investors) are less likely to choose annuity ownership compared to those with low objective and low subjective investment knowledge. The findings and ensuing discussion highlight the importance of annuitization when planning for retirement, with implications for financial service professionals.
Research limitations/implications:
The measure of investor sophistication does not assess the difficulty level of each financial knowledge question. The questions used to construct the investor sophistication variable are based on general investment knowledge. In addition, the annuity ownership variable used in this study pertains to investments outside retirement accounts. Despite these limitations, the findings highlight the importance of annuitization when planning for retirement.
Originality/value:
Unlike prior studies, the authors consider four mutually exclusive measures of investor sophistication constructed from measures of objective and subjective investment knowledge to understand the effect of investor sophistication on annuity ownership in the United States.
2023: Subjective Health Status and Annuity Participation
Authors
Blain Pearson, Thomas Korankye
Journal
Consumer Interests Annual
Volume 69
Description
Purpose:
This study examines subjective health evaluation and its association with annuity participation. In the event of a health shock, individuals may face high liquidity needs during a reduced longevity period. Consequently, subjective health status may serve as a form of intertemporal risk calibration when assessing the subjective discount factor at which the present value of an annuity benefit is estimated. The findings suggest that individuals who subjectively evaluate their health status as better than average are more likely to own an annuity compared to those who subjectively evaluate their health status as lower than average.
2023: The Role of Financial Advisors in Shaping Investment Beliefs
Authors
Blain Pearson, Thomas Korankye, Di Qing
Journal
Journal of Personal Finance
Volume 22, Issue 1, Pages 24-36
Publisher
International Association of Registered Financial Consultants (IARFC)
The objective of this study is to examine the influence of financial advisors on their clients’ investment beliefs. A theoretical model is first introduced, establishing a framework for how financial advisors affect the investment beliefs of their clients. The authors empirically test the theoretical model with data collected from the RAND American Life Panel. The findings, generally, suggest an association between the influence of a financial advisor and their clients’ investment beliefs. The ensuing discussion highlights the need for financial advisors to be aware of their own investment beliefs, attitudes, and behaviors when working with clients. The conclusions orbit around the need for financial counseling and communication education to be cemented as a part of the broader financial planning curricula
2022/9/6: The association between financial literacy confidence and financial satisfaction
Authors
Blain Pearson, Thomas Korankye
Journal
Review of Behavioral Finance
Description
Purpose
This study examines the association between financial literacy confidence and financial satisfaction. The authors posit that overconfident poor performers will experience greater levels of financial satisfaction and underconfident high performers will experience lower levels of financial satisfaction.
Design/methodology/approach
Based on the results of an objective financial literacy assessment and a subjective financial literacy assessment, variables measuring study participants’ financial literacy overconfidence and financial literacy underconfidence are constructed. The variables are analyzed for their associations with financial satisfaction.
Findings
The results from the multivariate analysis suggest that financial literacy overconfidence (underconfidence) is associated positively (negatively) with higher levels of financial satisfaction and is associated negatively (positively) with lower levels of financial satisfaction.
Practical implications
The discussion first highlights that to increase objective financial literacy, the disconnect between subjective financial literacy assessment and objective financial literacy must be recognized. Secondly, the discussion encourages financial literacy and education programs to incorporate behavioral education, which can provide learners with an awareness of the role of financial literacy confidence when making financial decisions.
Originality/value
Financial literacy overconfidence can result in an inability to recognize the realities of one’s financial situation. Individuals who are overconfident in their level of financial literacy preformed lower on an objective assessment of their financial literacy, yet also tended to have a greater sense of financial satisfaction. This finding not only suggests that financial literacy overconfidence results in financial ineptitude, but also suggest that financial literacy overconfidence can result in specious conclusions regarding one’s financial situation. The financial literacy underconfidence finding suggests that those who are financial literate, and who are also underconfident in their financial literacy, are less likely to have high financial satisfaction.
2022/4/4: The subjective well-being of self-employed persons: a national survey evidence from Ghana
Authors
Thomas Korankye, Joshua King Safo Lartey
Journal
Journal of Economic and Administrative Sciences
Publisher
Emerald Publishing Limited
Description
Purpose
This study aims to examine the subjective well-being of self-employed persons relative to wage employees in Ghana. Two measures of subjective well-being, comprising life satisfaction and happiness, are considered.
Design/methodology/approach
The current study focuses on Ghanaian working adults, uses pooled cross-sectional datasets from the 2005 to 2014 World Values Survey (WVS), applies survey weights, estimates ordered probit models and computes marginal effects.
Findings
The results show that being self-employed is associated with a lower probability of being satisfied with life than being wage employed. The result for happiness is negative but not statistically significant. The perceived low level of life satisfaction among the self-employed in Ghana could explain the rationale behind the desire of some Ghanaians to seek wage employment rather than pursuing self-employment. The results also could partly explain the non-survival of some entrepreneurial firms in Ghana over time.
Research limitations/implications
Data relating to factors such as business size, location (urban or rural), degree of internationalization (domestic or foreign), number of years of being in self-employment, the number of employees, financial knowledge and behavior and personality traits are unavailable in the WVS for analyses. The present study also uses a pooled cross-sectional dataset for the analyses; thus, causal inferences are not possible.
Originality/value
The study provides empirical evidence on the relationship between self-employment and subjective well-being in the context of Ghana. The study provides insights into how self-employed Ghanaians perceive well-being relative to wage employees.
2022/4: Enriching lives: how spending time with pets is related to the experiential well-being of older Americans
Authors
Charlene M Kalenkoski, Thomas Korankye
Journal
Applied Research in Quality of Life
Volume 17 Issue 2
Publisher
Springer Netherlands
Description
This study examines how caring for pets and walking, exercising, or playing with pets is associated with the experiential well-being of older Americans using activity-episode-level data from the 2010, 2012, and 2013 American Time Use Surveys (ATUS) and their associated Well-Being Modules (WBM). Estimating a series of ordered probit models that relate various measures of experiential well-being to different measures of pet-related activities, the results show that caring for pets is associated with greater meaning than other activities, controlling for a standard set of demographic and other person-level characteristics. Walking, exercising, or playing with household pets or animals is associated with greater happiness and meaning and less stress relative to other activities. The results from sensitivity analyses show that the magnitudes of the associations for people who live alone are larger than for those who live with others.
2022/3: Differences in the experiential well-being of hispanics and non-hispanics engaged in elder care
Authors
Charlene Marie Kalenkoski, Mónika López-Anuarbe, Thomas Korankye
Journal
Journal of Family and Economic Issues
Volume 43, Issue 1, Pages 128-137
Publisher
Springer US
Description
Little attention has been given to how Hispanics differ from non-Hispanics in the well-being they experience while engaging in elder care. This paper uses the 2012 and 2013 American Time Use Surveys (ATUS) and their corresponding Well-being Modules (WBM) to examine how elder care is associated with experiential well-being and how this differs for Hispanic and non-Hispanic caregivers. The sample is limited to regular caregivers for the elderly as defined in the ATUS. Ordered probit models are estimated for several measures of experiential well-being, separately for Hispanic and non-Hispanic subsamples. These measures include how meaningful an activity episode is for a respondent, and how happy, sad, tired, in pain, and stressed they felt during the activity. Standard controls, including health status of the respondent, are included as regressors. Results suggest that, while Hispanics reported a greater psychic benefit (happiness and meaning) when engaging in elder care compared to other daily activities, they also reported higher sadness levels when caring for household members. Although the direct cause of sadness cannot be identified, these conflicting results are consistent with the literature suggesting that, even though Hispanics value collectivistic culture traits, such as familism and have positive caregiving examples from family members, they also have weaker support networks and are reluctant to report burden.
2022: The role of financial relativity in loss aversion sensitivity
Authors
B. Pearson, D. Qing, T. Korankye
Journal
Empirical Economics Letters
Volume 21, Issue 8
Description
This study examines whether a predictor of loss aversion sensitivity is related to investors’ existing financial condition. Using two measures of loss aversion sensitivity, we find no statistically significant loss aversion sensitivity difference between those with low and high levels of financial assets. Higher degrees of loss aversion sensitivity is found to be strongly associated for investors with financial assets between $1,000 and $99,999. The conclusions drawn orbit the notion that loss aversion sensitivity may be overestimated or underestimated without considering the relative impact of losses on investors’ current financial position.
2021: Student Loan Debt and Financial Well-Being of the Borrower: Does It Matter Whom the Debt Is For?
Authors
T Korankye, CM Kalenkoski
Journal
Journal of Personal Finance
Volume 20, Issue 2
Description
Using data from the 2017 U.S. Survey of Household Economics and Decisionmaking (SHED), this study classifies student debt into three categories by beneficiary (self, spouse, and children) and examines the relationship between each category and financial well-being. The results show that the association of student debt with the financial well-being of borrowers is negative and significant, regardless of whether the loan is used to finance the education of the borrower, spouse, or children. The paper further finds evidence that the marginal effect of student debt on the financial well-being of the borrower is substantial when the debt is used to finance the education of children rather than the education of the borrower or the borrower’s spouse. The implications of the study for practitioners are discussed.
2021/12: The effect of households’ student debt on life satisfaction
Authors
Thomas Korankye, Charlene M Kalenkoski
Journal
Journal of Family and Economic Issues
Volume 42, Issue 4, Pages 757-772
Publisher
Springer US
Description
This study finds a negative effect of holding student-loan debt on the life satisfaction of household heads using longitudinal data from the 2011 to 2017 U.S. Panel Study of Income Dynamics and a fixed-effects modeling approach. Although debt is taken to improve future utility, it provides disutility to the head of household until it is paid off. Thus, financial planners and educators should remind their clients about the consequences of holding student-loan debt in the short term, not just the future benefits.
2021/6/1: Student Loan Debt and Financial Well-Being of the Borrower: Does It Matter Whom the Debt Is For?
Authors
Thomas Korankye, Charlene M Kalenkoski
Journal
Journal of Personal Finance
Volume 20, Issue 2
Description
Using data from the 2017 US Survey of Household Economics and Decisionmaking (SHED), this study classifies student debt into three categories by beneficiary (self, spouse, and children) and examines the relationship between each category and financial well-being. The results show that the association of student debt with the financial well-being of borrowers is negative and significant, regardless of whether the loan is used to finance the education of the borrower, spouse, or children. The paper further finds evidence that the marginal effect of student debt on the financial well-being of the borrower is substantial when the debt is used to finance the education of children rather than the education of the borrower or the borrower’s spouse. The implications of the study for practitioners are discussed.
2021/3/12: Student debt and stock-ownership decisions of US households
Authors
Thomas Korankye, Michael Guillemette
Journal
Applied Economics Letters
Volume 28, Issue 5, Pages 387-390
Publisher
Routledge
Description
This study contributes to the literature on the stock-holding puzzle by examining the effects of student debt on the decision of U.S. households to own stocks in non-retirement accounts. The study uses longitudinal data from the 2011 to 2017 U.S. Panel Study of Income Dynamics for the analyses. The results show that households with student debt have a lower probability of owning stocks in a non-retirement account compared to households without student debt. The results also show that the amount of student debt is associated negatively to the decision to own stocks in a non-retirement account. The findings suggest that the financial constraints associated with student debt may influence stock ownership in a non-retirement account.
2021: Determinants of Parents’ College Education Saving Decisions
Authors
Thomas Korankye, Charlene Kalenkoski
Journal
Journal of Personal Finance
Volume 20, Issue 1, Pages 8-25
Publisher
International Association of Registered Financial Consultants
Description
This study examines the factors associated with the decisions of US households to save for the college education of their children using state-level data from the 2015 US National Financial Capability Study. The results suggest that financially fragile households and those characterized by low income, low education, more children, no health insurance, and no homeownership are less likely to have college savings. Households who are willing to take financial risks and those with higher perceived financial knowledge are more likely to save for the college education of their children. Whereas bond-and loan-pricing literacy are the only components of financial literacy that are associated with a higher probability of college savings, the overall financial literacy score is associated with a lower likelihood of saving for college.
2020/7: Vitamin D, Cognitive Function, and Gait Speed in Older Adults: a NHANES Study
Authors
Charlene M Kalenkoski, Conrad Lyford, Thomas Korankye, Meredith Gavin, Alan N Peiris
Journal
Journal of Population Ageing
Pages 1-10
Publisher
Springer Netherlands
Description
Vitamin D deficiency has been linked to poor cognition and neuromuscular impairment. We evaluated the relationships of vitamin D levels with cognitive function and gait speed in older adults. The study sample included 1076 individuals (age = > 60 years) from the 2001–2002 National Health Examination Survey (NHANES). The relationships between vitamin D and cognition and gait speed were studied. Cognitive function was measured as the number of questions correct on a digit-symbol test. Gait speed was measured as seconds to walk 20 ft. Serum 25(OH)D concentrations were measured via the DiaSorin radioimmunoassay. In our study, 32% were deficient in vitamin D (< 20 ng/ml) and 43% were insufficient in vitamin D (20–29 ng/ml). Only 25% had vitamin D values in the normal range (30–100 ng/ml). The mean vitamin D level, cognition score, and gait speed were found to be 24.71 ng/ml, 48.55 number correct, and 6.80 s, respectively. The relationship between vitamin D and cognitive function was an inverted U-shaped curve. Maximum cognition score was at a vitamin D value of 28.09 ng/ml. The relationship between vitamin D and gait speed was U-shaped. Minimum walking time was at a vitamin D level of 31.42 ng/ml. Optimal vitamin D levels were similar for both cognition and gait speed. Given the high prevalence of vitamin D deficiency in the elderly, we recommend that older individuals are tested and treated to achieve 25(OH) D values at least between 28 and 30 ng/ml.