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By Barbara O’Neill, Ph.D., CFP®

Personal finance research informs high-quality financial education briefings, publications, and 1:1 financial counseling sessions. Below are findings and implications for practice from four recent studies:

Student Loan Decision-Making – This study by Porto et al. found evidence of “anchoring bias” as a reference point for decisions. Anchoring bias is where people rely heavily on the first thing they learn about a topic, which prevents them from considering new information. The researchers found that the more respondents borrowed personally for college, the more likely they were to think a higher amount borrowed by a hypothetical high school student is okay. First-generation students, by definition, do not have parents with college experience.

  • Implications: People are influenced by life experiences. Lack of parental college and student loan experience could limit support for their children who are first-generation students. Financial practitioners and college career counselors may need to provide greater outreach and support services for these students. Military Personal Financial Managers (PFMs) play a key role in teaching first-generation students about funding options for education including the Post-9/11 GI Bill and tuition assistance programs.

Retirement Savings Withdrawals – For almost three decades, the standard advice for having a high probability of success (i.e., not outliving your savings) was to withdraw 4% of retirement assets (any amount) during the first year of retirement and then inflation-adjust that amount annually to have the money last 30 years. This recommendation became known as “The 4% Rule.” Research published in 2021 found that people who want a high probability of success should withdraw no more than 3.3% of their savings in year one. This finding is based upon an expectation of lower future returns for stocks and bonds and lower investment earnings.

  • Implications: These findings can inform future retirement planning decisions, including the amounts of money workers save and retirees can expect to withdraw annually during retirement. Future retirees who withdraw a smaller percentage of their portfolio may need to consider supplemental income sources (e.g., working longer).

Military Family Finances – O’Neal et al. studied financial boundary ambiguity (i.e., who does what with respect to family finances) among military spouses following a deployment. They found that role flexibility and clear/open communication were related to less financial boundary ambiguity and higher marital quality.

  • Implications: Military family-serving professionals can share information about fostering communication and reducing the stress around financial roles during times of transition. An example is encouraging military families to use “I messages” that express feelings versus “you messages” that place blame. Example: “I feel scared

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[or another feeling]

when we have less than $500 in our checking account [describe action] because we have a small cushion [describe the impact of the action].”

Stock Trading Apps – A study by Barber et al. found that the use of a popular online stock trading app does not correlate with successful investing. Users of the app traded 40 times as many shares as users of a large discount brokerage firm. They also had smaller accounts, on average, than investors at other brokerages and concentrate their funds in a smaller number of stocks than average retail investors, a practice known as “herding.”

  • Implications: The use of apps to invest has fostered a new era of speculation and emotional investing among novice investors who do not have a clearly defined investment strategy. Findings from this study confirm the need to teach basic investing concepts in engaging ways that match the “fun factor” experienced with apps.

Barber, B., Huang, X., Odean, T., & Schwarz, C. (2021). Attention-induced trading and returns: Evidence from Robinhood users. Journal of Finance.

Benz, C.  Rekenthaler, J. (2021). What’s a safe retirement spending rate for the decades ahead? Morningstar.

O’Neal, C.W., Gale, J., Goetz, J, & Mancini, J.A. (2021). Financial boundary ambiguity among military spouses. Family Relations, 70, 1265-1279.

Porto, N. Cho, S. & Gutter, M. (2021). Student loan decision making: Experience as an anchor. Journal of Family and Economic Issues, 42, 773-784