The document discusses inadequate retirement savings in the US and how the Belief-Desire-Intention (BDI) model, used to build software agents, can be applied to retirement planning. It describes how the BDI model balances long-term goal-directed behavior with short-term reactive behavior. The Goal-directed and Reactive Investment Planning (GRIP) program would use BDI principles to help savers balance long and short-term retirement goals while addressing barriers to key retirement decisions.

1. BDI Models and its Application to Retirement Savings Anand S. Rao Diamond Management & Technology Consultants SABE-2007 Presentation May 18, 2007

3. Inadequate Retirement Savings Mistaken beliefs amongst the majority of workers is one of the contributing factors for inadequate retirement savings A large proportion of the US population, the ‘boomer’ generation, is entering the retirement stage, but are not saving enough to maintain their standard of living and provide for health, longevity risk, and long-term care People expect to work longer than they actually do People think they are saving more than they really are People think they have more pension coverage than they do People underestimate the age at which they will receive social security Workers consistently underestimate what percentage of pre-retirement income is needed during retirement

4. Inadequate Retirement Savings More than 50% of late boomers and retirees are ‘at risk’ of being unable to maintain pre-retirement standard of living

5. Inadequate Retirement Savings People expect to work longer and the amount of savings for retirement, excluding employer contribution is very close to zero People expect to work longer than they actually do People think they are saving more than they really are

6. Inadequate Retirement Savings People expect to have more pension coverage and also expect social security to be available earlier People think they have more pension coverage than they do People underestimate the age at which they will receive social security Eligibility for social security payment increasing from 62 to 67 by 2022

7. Inadequate Retirement Savings Majority of workers estimate 50-85% of pre-retirement income as being adequate while the current income of retirees is 95% or above Workers consistently underestimate what percentage of pre-retirement income is needed during retirement

9. Key Retirement Decisions and Barriers to Decision-Making Retirement planning involves four key decisions regarding enrollment, contribution rate, choice of asset allocation and ongoing portfolio balancing Enrollment Contribution Rate Asset Allocation Portfolio Re-Balancing Key Retirement Decisions Inertia to act Key Barriers to Decision Making Procrastination Lack of self-control Complexity of products Explosion of choices Customer ignorance Should I enroll in a retirement savings plan (e.g., 401k) or not? How much should I contribute every pay period? How to allocate the funds across different asset classes? How to change the contribution rate and asset allocation over time and in response to life events?

12. Key Retirement Decisions and Barriers to Decision-Making Both behavioral economics inspired interventions have proven to be successful in increasing number of people enrolling and increasing savings rate Results of Interventions Auto-enrollment substantially increases participation across all customer segments Significant increase in average savings rate amongst SMarT TM participants