Why do we make the decisions we do when it comes to money?

In today’s episode of Carson Group and PIMCO‘s Retirement Income Series, behavioral economist Dr. Richard H. Thaler takes listeners on a journey through the psychology of decision-making.

Winner of the Nobel Memorial Prize in Economic Sciences, Richard is also co-author of the global bestseller Nudge and Misbehaving: The Making of Behavioral Economics. Fun fact: He was also in the movie The Big Short.

Throughout his illustrious career, Richard has challenged what he says are the major assumptions in economics: people are smart, unemotional, good at self-control and uncaring toward others. He believes retirement saving and income planning are the ideal behavioral economics topics because they show how wrong these assumptions really are.

In today’s episode, Richard talks with Jamie and Devin Ekberg, Senior Consultant and Education Advisor with PIMCO, about his year at Stanford where he met Daniel Kahneman and Amos Tversky, who were completing the final draft of Prospect Theory; plus the breakthrough in economics that paved the way for his own pioneering work. He shares the story behind Save More Tomorrow, the behavioral intervention he helped design to make saving for retirement as easy and painless as possible. He also talks about the role advisors can play in helping people with their mental accounting; the need to financially engineer a paycheck for people in retirement; and more.

Key Takeaways

  • “Gambling with the house money” is the notion that it’s OK to gamble with your winnings because that’s the casino’s money. Advisors can help people manage this “mental accounting” to optimize retirement income planning.
  • Many people experience spending from a portfolio as a loss. It is up to advisors to get clients comfortable with what they are doing. For this reason, how you frame where money comes from and where it is going is very important.
  • Most people have learned the basic rule of household budgeting – spend less than you earn – which is why it’s hard for them to spend in retirement when they are no longer earning a regular income. Advisors can help clients draw down their wealth sustainably by structuring their portfolios so they receive the equivalent of a paycheck replacement in retirement.


“The one bit of retirement income advice I am most confident of is this: If you can, delay claiming Social Security until age 70, because the Social Security annuity is indexed and you can’t buy that on the market.” – Dr. Richard Thaler


Carson Group is committed to advancing financial literacy. Schedule a consultation to learn how Carson can help you help your clients and grow your business. Visit PIMCO to learn more about the work it is doing in the retirement income planning space.

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