3303 Steinberg Hall-Dietrich hall
3620 Locust Walk
Philadelphia, PA 19104
3406 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104
Research Interests: economics of public and private pensions, household portfolio and retirement behavior, employee benefits/compensation, health/retirement analysis and policy, global private/social insurance, labor economics, public finance, risk and crisis management
Links: CV
Dr. Olivia S. Mitchell is the International Foundation of Employee Benefit Plans Professor, as well as Professor of Insurance/Risk Management and Business Economics/Policy; Executive Director of the Pension Research Council; and Director of the Boettner Center on Pensions and Retirement Research; all at the Wharton School of the University of Pennsylvania. Concurrently Dr. Mitchell serves as a Research Associate at the NBER; Independent Director on the Allspring Mutual Fund Boards ; Co-Investigator for the Health and Retirement Study at the University of Michigan; and Member of the Executive Board for the Michigan Retirement Research Center. She also advises the Centre for Pensions and Superannuation UNSW; Research Fellow, Leibnitz Institute for Financial Research SAFE, Goethe University Frankfurt; and the Advisory Committee, Retirement and Savings Institute, HEC Montreal. She received the MA and PhD degrees in Economics from the University of Wisconsin-Madison, and the BA in Economics from Harvard University. Dr. Mitchell was also awarded the Doctor Rerum Publicarum Honoris Causa, Goethe University of Frankfurt; Doctor Oeconomiae Honoris Causa, University of St. Gallen; and an honorary Master’s degree from the University of Pennsylvania.
Professor Mitchell’s professional interests focus on public and private pensions, insurance and risk management, financial literacy, and public finance. Her research explores how systematic longevity risk and financial crises can shape household portfolios and work patterns over the life cycle, the economics and finance of defined contribution pensions, financial literacy and wealth accumulation, and claiming behavior for Social Security benefits. Her research has been appeared in leading academic journals including the American Economic Review, the Journal of Political Economy, the Journal of Public Economics, and the Review of Finance, and it has been featured in outlets such as The Economist, the New York Times, and the Wall Street Journal. She also blogs on Forbes. She has published over 270 books and articles, and she is a Senior Editor of the Journal of Pension Economics and Finance.
Dr. Mitchell received the Fidelity Pyramid Prize for research improving lifelong financial well-being; the Carolyn Shaw Bell Award of the Committee on the Status of Women in the Economics Profession; and the Roger F. Murray First Prize (twice) from the Institute for Quantitative Research in Finance. She was also honored with the Premio Internazionale Dell’Istituto Nazionale Delle Assicurazioni from the Accademia Nazionale dei Lincei in Rome. Her study of Social Security reform won the Paul Samuelson Award for “Outstanding Writing on Lifelong Financial Security” from TIAA-CREF. In 2011, Investment Advisor Magazine named her one of the “25 Most Influential People” and “50 Top Women in Wealth;” in 2010 she received the Retirement Income Industry Association’s Award for Achievement in Applied Retirement Research; and in 2010 Wealth Management Magazine named her one of the “50 Top Women in Wealth.” In 2015, she was named a “Top 10 Women Economist” by the World Economic Forum, and in 2016 Crain Communications named her a “Top 100 Innovator, Disruptor, and Change-Maker in Business.” In 2019, Worth.com named her a “Top 16 Powerhouse Female Economist.”
Previously Professor Mitchell chaired Wharton’s Department of Insurance and Risk Management, and she also taught for 16 years at Cornell University. She was a Commissioner on the President’s Commission to Strengthen Social Security; a Member of the US Department of Labor’s ERISA Advisory Council; and on the Board of Directors of Alexander and Alexander Services, Inc., the Board of the American Economic Association, the Advisory Board for the Central Provident Fund of Singapore, the National Academy of Social Insurance Board, the Board of the Committee on the Status of Women in the Economics Profession, and the GAO Advisory Board. She also co-chaired the Technical Panel on Trends in Retirement Income and Saving for the Social Security Advisory Council; and she served as Vice President for the American Economic Association.
Professor Mitchell has visited and taught at numerous institutions including Harvard University, the NBER, Cornell University, the Goethe University of Frankfurt, the Singapore Management University, and the University of New South Wales. Professor Mitchell has consulted with many public and private groups including the World Economic Forum, the International Monetary Fund, the Investment Company Institute, the President’s Economic Forum, the World Bank, the International Foundation of Employee Benefit Plans, the White House Conference on Social Security, the Q Group, and the Association of Flight Attendants. She has also testified before numerous committees of the US Congress, the UK Parliament, the Australian Parliament, the US Department of Labor, and the Brazilian Senate. She speaks Spanish and Portuguese, having lived and worked in Latin America, Europe, and Australasia.
Academic Positions
Wharton: 1993-present: International Foundation of Employee Benefit Plans Professor and Executive Director Pension Research Council; Professor of Insurance & Risk Management. 2008-present; Director, Boettner Center for Pensions and Retirement Research. 2012- Present: Professor of Business Economics & Public Policy. Previous positions: Department Chair Insurance & Risk Management, Wharton; Assistant/Associate/Full Professor, Cornell University. Previous visiting appointments at University of New South Wales, Australia; Goethe Universitat of Frankfurt; Celia Moh Visiting Professor, Singapore Management University, Harvard University, NBER.
Other Positions
Professional Leadership 2010-present
Research Associate, National Bureau of Economic Research; Co-PI and Executive Committee for Health and Retirement Study; Michigan Retirement Research Center Executive Committee; Scientific Advisor for Centre for Pensions and Superannuation UNSW; Executive Committee, Penn Aging Research Center; Senior Editor, Journal of Pension Economics and Finance; Board of Editors, Journal of Pensions Management; Senior Fellow, Wharton Financial Institutions Center; Senior Fellow, Leonard Davis Institute; Senior Research Scholar, CREA, Singapore Management University.
Corporate and Public Sector Leadership 2010-present
Independent Trustee of the Wells Fargo Trust Boards; Chilean Pension Reform Commission; Research Fellow of the Leibnitz Institute for Financial Research SAFE, Goethe University Frankfurt; Philadelphia Federal Reserve Academic Advisory Council for the Consumer Finance Institute
James Li, Olivia S. Mitchell, Christina Zhu (Working), Household Investment in 529 College Savings Plans and Information Processing Frictions.
Abstract: We investigate how information processing frictions contribute to household suboptimal saving and investment behavior. We find that 60% of open accounts in college 529 savings plans are invested suboptimally due to high expenses and tax inefficiency. Such investments yield an expected loss of 9% over the accounts’ projected lifetimes. Consistent with information processing frictions contributing to inefficient investment, the extent of investment in suboptimal home-state accounts decreases with household financial literacy and increases with plan document disclosure complexity. Overall, our results suggest that information processing frictions shape households’ suboptimal investment in college savings plans and reduce their financial well-being.
Stephen Dimmock, Roy Kouwenberg, Olivia S. Mitchell, Kim Peijnenberg (Forthcoming), Household Portfolio Underdiversification and Probability Weighting: Evidence from the Field.
Abigail Hurwitz, Olivia S. Mitchell, Orly Sade (2021), Longevity Perceptions and Saving Decisions during the COVID-19 Outbreak: An Experimental Investigation, AEAP&P.
Robert Clark, Annamaria Lusardi, Olivia S. Mitchell (2021), Financial Fragility during the COVID-19 Pandemic, AEAP&P.
Raimond Maurer, Olivia S. Mitchell, Ralph Rogalla, Tatjana Schimetschek (2021), Optimal Social Security Claiming Behavior under Lump Sum Incentives: Theory and Evidence, Journal of Risk and Insurance, 88, pp. 5-27.
Justine Hastings and Olivia S. Mitchell (2020), How Financial Literacy and Impatience Shape Retirement Wealth and Investment Behaviors, Journal of Pension Economics and Finance, 19 (1), pp. 1-20.
Vanya Horneff, Raimond Maurer, Olivia S. Mitchell (2020), Putting the Pension Back in 401(k) Plans: Optimal Retirement Plan Design with Longevity Income Annuities, Journal of Banking and Finance.
Raimond Maurer and Olivia S. Mitchell (2020), Older Peoples’ Willingness to Delay Social Security Claiming, Journal of Pension Economics and Finance.
Daniel Gottlieb and Olivia S. Mitchell (2019), Narrow Framing and Long-Term Care Insurance, Journal of Risk and Insurance, 87 (4), pp. 861-893.
Annamaria Lusardi, Olivia S. Mitchell, Noemi Oggero (2019), Debt and Financial Vulnerability on the Verge of Retirement, Journal of Money, Credit, and Banking, 52 (5), pp. 1005-1034.
Fall 2012: BEPP 250, Intermediate Microeconomics
Research shows that many individuals are profoundly underinformed about important financial facts and financial products, which frequently lead them to make mistakes and lose money. Moreover, consumer finance comprises an enormous sector of the economy, including products like credit cards, student loans, mortgages, retail banking, insurance, and a wide variety of retirement savings vehicles and investment alternatives. Additionally, recent breakthroughs in the FinTech arena are integrating innovative approaches to help consumers. Though virtually all people use these products, many find financial decisions to be confusing and complex, rendering them susceptible to fraud and deception. As a result, government regulation plays a major role in these markets. This course intended for Penn undergraduates considers economic models of household decisions and examines evidence on how consumers are managing (and mismanaging) their finances. Although academic research has historically placed more attention on corporate finance, household finance is receiving a brighter spotlight now-- partly due to its role in the recent financial crisis. Thus the course is geared toward those seeking to take charge of their own financial futures, anyone interested in policy debates over consumer financial decision making, and future FinTech entrepreneurs.
The last financial crisis and subsequent recession provide ample evidence that failure to properly manage risk can result in disaster. Individuals and firms confront risk in nearly all decisions they make. People face uncertainty in their choice of careers, spending and saving decisions, family choices and many other facets of life. Similarly, the value that firms create by designing and marketing good products is at risk from a variety of sources. The bankruptcy of a key supplier, sharp rise in cost of financing, destruction of an important asset, impact of global warming, or a liability suit can quickly squander the value created by firms. In extreme cases, risky outcomes can bankrupt a firm, as has happened recently to manufacturers of automobile parts and a variety of financial service firms. The events since the Global Financial Crisis also offer stark reminders that risk can impose significant6 costs on individuals, firms, governments, and society as a whole. This course explores how individuals and firms assess and evaluate risk, examines the tolls available to successfuly mange risk and discusses real-world phenomena that limit the desired amount of risk-sharing. Our focus is primarily on explaining the products and institutions that will serve you better when making decisions in your future careers and lives.
This course presents an analysis of overall private wealth management. This includes planning for disposition of closely-held business interests; the impact of income taxes and other transfer costs on business interests and other assets; integration of life insurance, disability insurance, medical benefits, and long-term care insurance in the financial plan; planning for concentrated asset (e.g. common stock) positions, diversification techniques, and asset allocation strategies; distribution of retirement assets; lifetime giving and estate planning; and analysis of current developments in the creation, conservation, and distribution of estates. Attention also is given to various executive compensation techniques (including restricted stock and stock options) and planning for various employee benefits. The course also covers sophisticated charitable giving techniques and methods for financing educaton expenses. Reading consist of textbooks, case studies, and bulk pack articles.
The last financial crisis and subsequent recession provide ample evidence that failure to properly manage risk can result in disaster. Individuals and firms confront risk in nearly all decisions they make. People face uncertainty in their choice of careers, spending and saving decisions, family choices, and many other facets of life. Similarly, the value that firms create by designing and marketing good products is at risk from a variety of sources. The bankruptcy of a key supplier, sharp rise in cost of financing, destruction of an important asset, impact of global warming, or a liability suit can quickly squander the value created by firms. In extreme cases, risky outcomes can bankrupt a firm, as has happened recently to manufacturers of automobile parts and a variety of financial service firms. The events since the Global Financial Crisis also offer stark reminders that risk can impose significant costs on individuals, firms, governments, and societ6y as a whole. This course explores how individuals and firms assess and evaluate risk, examines the tools available to successfully manage risk, and discusses real-world phenomena that limit the desired amount of risk-sharing. Our focus is primarily on explaining the products and institutions that will serve you better when making decisisions in your future careers and lives.
Primarily for advanced students who work with individual instructors upon permission. Intended to go beyond existing graduate courses in the study of specific problems or theories or to provide work opportunities in areas not covered by existing courses.
Research shows that many individuals are profoundly underinformed about important financial facts and financial products, which frequently lead them to make mistakes and lose money. Moreover, consumer finance comprises an enormous sector of the economy, including products like credit cards, student loans, mortgages, retail banking, insurance, and a wide variety of retirement savings vehicles and investment alternatives. Additionally, recent breakthroughs in the FinTech arena are integrating innovative approaches to help consumers. Though virtually all people use these products, many find financial decisions to be confusing and complex, rendering them susceptible to fraud and deception. As a result, government regulation plays a major role in these markets. This course intended for Penn undergraduates considers economic models of household decisions and examines evidence on how consumers are managing (and mismanaging) their finances. Although academic research has historically placed more attention on corporate finance, household finance is receiving a brighter spotlight now-- partly due to its role in the recent financial crisis. Thus the course is geared toward those seeking to take charge of their own financial futures, anyone interested in policy debates over consumer financial decision making, and future FinTech entrepreneurs.
How much financial damage has the Covid crisis done to Social Security? We may be about to find out. The 2021 annual report from the Social Security trust fund administration is expected to drop within weeks, possibly days, my sources say. This will be the first official status report on the fund’s finances since COVID-19 swept across America last year. This year’s report is already about four months late. The report will be critical. One of the country’s leading experts is warning that the Social Security trust fund could run out of money as soon as 2029, five years ahead of official projections, because of the fallout from the Covid crisis. That’s the warning from Olivia Mitchell, a professor at the University of Pennsylvania’s Wharton School of Business and director of their Pension Research Council.
“It seems that the date of insolvency of SS has crept sooner — perhaps as early as 2029,” Mitchell says in a new Wharton podcast. She adds: “So that’s in eight years. And that’s partly a function of a lot of people having lost their jobs, so they’re not paying in [to] Social Security. Some people have retired early, so they’re claiming earlier and therefore drawing down.” The last official projection from the trustees said the system would be OK until 2034. But that prediction was made early last year. It is hopelessly out of date. “This year the trustees are very late,” says Mitchell. “They have not issued their report, and it’s August. They’re supposed to put it out in March or April. So nobody really knows what the numbers are going to be.”
The independent Congressional Budget Office has already brought forward its expected date of insolvency to 2032. Almost all of us will be relying on Social Security to varying degrees in our senior years. Some 180 million Americans are members of our national pension plan, which was set up by Franklin Roosevelt during the Depression and has been the mainstay of American retirement ever since.
It’s well-documented that Social Security faces a massive financing shortfall that threatens its solvency unless lawmakers swiftly enact corrections. However, this isn’t the only reason to reform Social Security. The program doesn’t treat work or workers fairly, and this needs to change.
By the time workers reach late middle age, each dollar of payroll taxes they contribute delivers on average only 2.5 cents in additional benefits. The reasons for this mistreatment are various, but are rooted in the fact that lawmakers have never adequately considered Social Security’s effects on work.
The 1935 Committee on Economic Security that advised President Franklin Roosevelt on Social Security’s design took it for granted, amid the Great Depression, that workers “past middle life” had “uncertain prospects of ever again returning to steady employment.” In the 1970s, lawmakers enacted automatic annual benefit increases that cannot be sustained unless workers’ tax burdens rise dramatically. Workers now beginning their careers are projected to be made poorer by Social Security, on average, by an amount exceeding 3 percent of their lifetime earnings.
The damage wrought by Social Security’s work disincentives is enormous. Healthy, productive workers are induced to drop out of the workforce, right at a moment in life when they are typically deciding whether to retire or continue working. Evidence shows that workers respond to these incentives by quitting work when their marginal Social Security tax rate is high.
Even before the pandemic, we faced an enormous labor participation challenge, with the baby boomer generation retiring in droves to spend more of their lives drawing government benefits than any previous generation. But especially now, when America lacks enough willing workers to fill employers’ needs, the last thing we need is for our largest domestic program to make the problem worse.
One problem is the archaic design of Social Security benefits. The benefit formula, reflecting bygone data limitations, is based on a worker’s average earnings in their highest 35 years (adjusted for national wage growth). The problem with this is obvious: As soon as a worker works for 35 years, he or she no longer accrues benefits at the same rate, because each subsequent year of earnings only counts toward benefits to the extent that it exceeds a previous year’s earnings.
Far better would be for workers to accrue Social Security benefits each year they work, just as workers in private pensions do. This requires changing the formula so that it operates separately on each year of earnings rather than on a career average. A side benefit of this reform is that it would actually save the system money, mostly by constraining benefit growth for sporadic high-income workers (to whom the current formula pays windfalls because it mistakes them for low-income workers).
We should also reform Social Security’s early retirement penalties and delayed retirement credits. The current system rightly adjusts monthly benefits for one’s age of claim — reducing benefits for those who claim early and draw for more years, while increasing benefits for those who delay retirement. The problem is that these adjustments are weak. Wharton economics professor Olivia Mitchell has found that offering the delayed retirement credit in a lump sum option (typically in the tens of thousands of dollars) could be a more powerful inducement to delay retirement than the current method of adjusting monthly benefits by a few percentage points. Current early/delayed retirement adjustments also don’t consider that those who keep working also continue to pay payroll taxes. To properly take workers’ taxes into account, early retirement penalties and delayed retirement credits need to be made larger than they now are.
Of course, there is no avoiding the most politically difficult issues, including Social Security’s outdated eligibility ages. There is only so much that other adjustments can accomplish, so long as eligibility ages remain badly out of sync with demographic realities.
The most common age of benefit claim today is 62. As long as healthy workers continue to claim benefits so early, program costs will be inflated, and workers’ tax burdens will be needlessly compounded. It bears noting that the current earliest eligibility age of 62 could be raised by three years, and still allow 21st-century workers to claim Social Security benefits at a younger age than those of the generation that fought the Spanish-American War of 1898. Then, too, initial benefit levels are currently indexed to grow faster than workers’ after-tax earnings. Until this cost growth is moderated, American workers’ standards of living will continue to fall behind.
While specific reforms should be thoroughly debated, we would all benefit from a general shift in Social Security’s posture toward work. To serve 21st-century needs, Social Security must be converted from a program that penalizes work to a program that rewards it.
Early baby boomers and millennials are ahead of other generations in terms of retirement preparedness, according to panelists at a recent symposium hosted by Wharton’s Pension Research Council.…Read More
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