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His latest Economic View column.

Imagine a set of 65-year-old identical twins who plan to retire this summer after long careers. We’ll call them Dave and Ron. They have worked for different employers and have accumulated retirement benefits worth the same amount in dollars, but the benefits won’t be paid out the same way.

Dave can count on a traditional pension, paying $4,000 a month for the rest of his life. Ron, on the other hand, will receive his benefits in a lump sum that he must manage himself. Ron has a lot of choices, but all have consequences. For example, he could put the money into a conservative bond portfolio and by spending the interest and drawing down the principle he could also spend $4,000 a month. If Ron does that, though, he can expect to run out of money sometime around the age of 85, which the actuarial tables tell him he has a 30 percent chance of reaching. Or he could draw down only $3,000 a month. He wouldn’t have as much to live on each month, but his money should last until he reached 100.

Who is likely to be happier right now? Dave or Ron?

Continue here.

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Dean Karlan and Jonathan Zinman adapt the Save More Tomorrow idea to help people better manage their debt. Zinman talks about the early results of Borrow Less Tomorrow.

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1) Asked about what scientific concept would improve everyone’s cognitive toolkit, “Richard Thaler proposes attaching the word “aether” to substitute for any variable that is asserted rather than proven — so, “business aren’t investing because of aether,” as opposed to “businesses aren’t investing because of uncertainty,” writes Ezra Klein.

2) French government develops strategies for “green nudges.” Pdf of paper is here. Hat tip: Olivier Oullier

3) Progress Energy in North Carolina will begin showing people how their energy usages compares with that of their neighbors. Hat tip: Environmental Economics.

4) Impulse saving in India (at the end of the article).

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If you find yourself trying to save on impulse, you’ll have a tough time. Who carries a piggy bank around with them? We’ve been waiting for more 21st century products that help people save by taking advantage of their impulse moments. Retail stores are set up to encourage impulse shopping. How about a few opportunities for impulse saving?

Along comes the New Zealand bank Westpac with an iPhone app that lets bank customers save money any time they want to simply by pressing a big red button on their iPhone. Customers can set up the app to save money in increments up to $50. An interactive explanation of the product is here. Here’s hoping more banks develop similar savings splurge apps.

Hat tip: James Verdigris.

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Project “Proverbial Wallets” from the MIT Media Lab. The key feature of each wallet:

1) Buzzes whenever a bank transaction occurs.
2) Resists opening when you need to save cash.
3) Swells and shrinks with your account balance.

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TIAA-CREF has come up with a marketing campaign straight out of a behavioral economics textbook. One of the challenges in saving for retirement is taking a long-term view of consumption by choosing amount X of pleasurable stuff today instead 4X some number of years from now. The campaign is called “Become your future you.”

Just a guess, the future you who is going to be a local superhero – yeah, it’s going to be more expensive than you think.

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1) Stop the impulse buy; start the impulse save. Hat tip: Thomas Sander.

2) The endowment effect in poker?

3) Five “persuasive” technologies. Hat tip: K.O.

4) 12 tactics retailers use to get you to spend more. Hat tip: Simoleon Sense.

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Faced with restaurant manager churn, McDonald’s decided to offer a generous company match to its 401k plans. Automatic enrollment with a 1 percent automatic annual deferral of salary were the default rules. To “ease the pain” of the 1 percent deferral, the company gave managers a one time 1 percent bump in salary. Hat tip: Kare Anderson.

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More than one American in five thinks that buying lottery tickets constitutes a sound retirement plan, according to a Tax Foundation study. And research carried out by the Federal Reserve Bank of St Louis in seven American states found that much of the money spent on lottery tickets came from some form of government assistance (such as social security, unemployment or disability benefit).

From the Economist. Hat tip: Simoleon Sense.

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Toys “R” Us is counting on an Eisenhower-era tactic to get consumers to spend this Christmas. The toy retailer will begin offering a “Christmas Savers Club” on Wednesday that allows shoppers to put money away with the company for holiday gifts. Participants will receive a card similar to a gift card, and can contribute funds to it through cash or credit card payments. As an incentive Toys “R” Us will add 3 percent interest on the balance.

Full story in NYT.

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