@article {9958, title = {Pension contributions, pension awareness, and changing personal finances}, journal = {Contemporary Economic Policy}, volume = {37}, year = {2019}, pages = {673-693}, type = {Journal}, abstract = {Workers with 401(k)s and similar defined contribution pensions adjust contributions facing large fluctuations in personal finances. Using administrative tax records linked to the Health and Retirement Study, this paper shows that adjustments differ for contributors who are aware and unaware of their pension coverage. Unaware contributors are more likely to stop contributing facing deteriorating finances, but adjust contributions similarly along the intensive margin. For example, 25\% of unaware contributors stop contributing facing earnings declines, but only 15\% of aware contributors do so. These findings have implications for policies like automatic enrollment and information campaigns that encourage retirement savings.}, keywords = {Finances, Financial literacy, Pensions}, doi = {10.1111/coep.12420}, url = {https://onlinelibrary.wiley.com/doi/abs/10.1111/coep.12420}, author = {Margaret Lay} } @article {9358, title = {Pension Plan Types and Financial Literacy in Later Life.}, journal = {Gerontologist}, volume = {59}, year = {2019}, pages = {260-270}, abstract = {

Background and Objectives: The ongoing shift from defined benefit (DB) to defined contribution (DC) pension plans means that middle-aged and older adults are increasingly being called upon to manage their own fiscal security in retirement. Yet, half of older Americans are financially illiterate, lacking the knowledge and skills to manage financial resources. This study investigates whether pension plan types are associated with varying levels of financial literacy among older Americans.

Research Design and Methods: Cross-sectional analyses of the 2010 Health and Retirement Study (HRS) (n = 1,281) using logistic and linear regression models were employed to investigate the association between different pension plans and multiple indicators of financial literacy. The potential moderating effect of gender was also examined.

Results: Respondents with DC plans, with or without additional DB plans, were more likely to correctly answer various financial literacy questions, in comparison with respondents with DB plans only. Men with both DC and DB plans scored significantly higher on the financial literacy index than women with both types of plans, relative to respondents with DB plans only.

Discussion and Implications: Middle-aged and older adults, who are incentivized by participation in DC plans to manage financial resources and decide where to invest pension funds, tend to self-educate to improve financial knowledge and skills, thereby resulting in greater financial literacy. This finding suggests that traditional financial education programs may not be the only means of achieving financial literacy. Further consideration should be given to providing older adults with continued, long-term exposure to financial decision-making opportunities.

}, keywords = {Financial literacy, Pensions, Retirement Planning and Satisfaction}, issn = {1758-5341}, doi = {10.1093/geront/gnx135}, author = {Li, Yang and Jeffrey A Burr and Edward Alan Miller} } @book {9521, title = {Reconstructing retirement: Work and welfare in the UK and USA}, year = {2018}, pages = {178}, publisher = {Policy Press}, organization = {Policy Press}, address = {Bristol, UK}, abstract = {In the United Kingdom, retirement programs are being reconstructed to follow the American practice of abolishing mandatory retirement and increasing state pension ages. This timely book compares prospects for work and retirement at age sixty five-plus in both the United States and the United Kingdom. After exploring the shifting logic behind both nations{\textquoteright} policies{\textemdash}policies that increase both the need and opportunities to work past age sixty five{\textemdash}David Lain presents an original comparative statistical analysis on the wide range of factors influencing employment at this age, from the ability to move between jobs in order to remain employed to changing employment trends. He then proposes a series of policies to address these factors across the life-course and promote security and autonomy for older people. Pathways to employment after sixty five are complex, and pressures to work at this age are likely to result in very unequal outcomes. This book will play a vital role in creating a more positive, more equitable future for late careers and retirement.}, keywords = {Bridge employment, Cross-National, Pensions, Retirement Planning and Satisfaction}, isbn = {9781447326199}, author = {Lain, David} } @mastersthesis {6415, title = {A life-cycle analysis of retirement savings and portfolio choices: Optimal asset allocation and location with taxable and tax-deferred investment}, volume = {Ph.D.}, year = {2010}, school = {State University of New York at Stony Brook}, address = {Stony Brook, NY}, abstract = {In this study, I analyze theoretically and empirically the optimal saving and investment decisions of the households in Defined Contribution (DC) pension accounts, and show that the pension characteristics play important roles in explaining the households{\textquoteright} behavior. The first essay attempts to explain the observed asset allocation and location decisions for households making taxable and tax-deferred investment. I incorporate employer matching policies and other pension account characteristics into a life-cycle model of optimal intertemporal consumption and portfolio choice, which includes a taxable saving account and a tax-deferred retirement saving account. The model is estimated using data from the Surveys of Consumer Finances (1992 to 2007), and the structural parameters are recovered by the Method of Simulated Moments. After modeling the features of U.S. pension system, the predicted policy rules are able to explain the observed portfolio patterns of American households, who are more likely to hold equities in the tax-deferred pension account. The estimates and results show that employer matching policy induces higher proportion of total wealth held in the pension account, so investors tend to reduce equity holdings in the taxable account for precautionary saving purpose and boost equity investments in the tax-deferred account to maintain an optimal portfolio mix. I find that a 10 percentage point increase in the estimated employer matching rate makes investors reduce the average equity proportion in the taxable account by 22 percentage point and boost those holdings in the pension account by 10 percentage point. In contrast, since the employer stock match exposes the households to a riskier situation in the pension account than the cash match, it causes households voluntarily to hold less equity in that account, resulting in an average decrease of 4 percentage point in the equity ownership and 3 percentage point in the conditional equity proportion. Moreover, the policy experiment reveals that a deletion of Social Security taxes and payments makes the pension account the only source of retirement income, so households tend to put a higher proportion of savings in the tax-deferred account, and they are likely to invest conservatively and hold about 25 percent more of pension wealth in relatively safe assets. The second essay is about company stock investment in 401(k) plans. Previous studies on the determinants of company stock holdings focus on the past stock market performance of company stock, but ignore the characteristics of the retirement plans and individuals. In this study, using the data from Survey of Consumer Finances (SCF), I provide an empirical analysis of the factors that affect company stock holdings in 401(k) plans, by analyzing a broad list of company features, individual characteristics, and financial wealth information. My preferred estimates suggest that, different from general stocks which are sensitive to risk preference and total wealth, the decision of whether to hold company stock is more likely to be affected by the employer{\textquoteright}s characteristics and the availability of other investment opportunities. Individuals who work in larger companies and receive more employer matches in the retirement account are more likely to hold company stock in the retirement account, and they are less likely to hold company stocks when the wealth outside the pension account is large and they have other retirement accounts. In addition, I find that the company stock share in 401(k) account is decreasing with pension wealth and total net wealth, which indicates that less wealthy individuals are those who are more exposed to company stock risk. The third essay analyzes the impact of investment choice on savings in defined contribution pensions. The striking growth defined contribution (DC) pensions have vastly expanded the number of individuals with some discretion regarding their retirement savings. One of the factors that may affect saving decisions is investment choice: namely the ability of the participant to direct the investment of the assets in the pension account. In most studies, people who report that they have control over assets allocation in pension plans do not distinguish the assets between the participant contribution and the employer contribution, but it is common for the employer{\textquoteright}s contribution to be constrained-often to company stock. In this study, I use the Health and Retirement Study (HRS) to estimate the impacts of unconstrained and constrained investment choices on participant saving levels in DC Pensions. The estimates and results indicate that participants with investment choice contribute over 3 percentage points more of their earnings into the defined contribution plan than people without choice, and people constrained in their investment contribute about 3 percentage points less in their retirement saving account. In addition, I find that male and lower income participants tend to contribute more in a self-directed saving account.}, keywords = {Consumption and Savings, Event History/Life Cycle, Methodology, Net Worth and Assets, Pensions, Retirement Planning and Satisfaction}, url = {https://crr.bc.edu/about-us/grants/a-life-cycle-analysis-of-retirement-savings-and-portfolio-choices-optimal-asset-allocation-and-location-with-taxable-and-tax-deferred-investment/}, author = {Li, Zhe} } @article {6867, title = {The Effect of Health on Retirement Saving Among Older Workers}, journal = {Social Work Research}, volume = {27}, year = {2003}, pages = {31-44}, publisher = {27}, abstract = {Using data from the first wave of the Health and Retirement Study, the authors investigated the association between health and retirement saving. The two most important findings were that (1) health has a large, significant effect on both the probability that a person nearing retirement age will contribute to an IRA and the amount of money that a person Will hold in IRAs, and (2) a spouse{\textquoteright}s health has a large, significant effect on a person{\textquoteright}s access to an employer-sponsored pension, the probability that a person will contribute to an IRA, and the amount of money held in an IRA.}, keywords = {Consumption and Savings, Health Conditions and Status, Pensions, Social Security}, author = {Lum, Y.S. and Lightfoot, Elizabeth} } @article {6866, title = {Guaranteeing Defined Contribution Pensions: The Option to Buy Back a Defined Benefit Promise}, journal = {Journal of Risk and Insurance}, volume = {70}, year = {2003}, publisher = {70}, abstract = {After a long commitment to defined benefit (DB) pension plans for U.S. public sector employees, many state legislatures have introduced defined contribution (DC) plans for their public employees. In this process, investment risk that was previously borne by state DB plans has now devolved to employees covered by the new DC plans. In light of this trend, some states have introduced a guarantee mechanism to help protect DC plan participants. One such guarantee takes the form of an option permitting DC plan participants to buy back their DB benefit for a price. This article develops a theoretical framework to analyze the option design and illustrate how employee characteristics influence the option{\textquoteright}s cost. We illustrate the potential impact of a buy-back option in a pension reform enacted recently by the State of Florida for its public employees. If employees were to exercise the buy-back option optimally, the market value of this option could represent up to 100 percent of the DC contributions over their work life.}, keywords = {Pensions}, url = {https://ssrn.com/abstract=388535}, author = {Lachance, Marie-Eve and Olivia S. Mitchell and Smetters, Kent} } @article {5498, title = {How Important Are Private Pensions?}, number = {IB$\#$8}, year = {2002}, institution = {Center for Retirement Research at Boston College}, address = {Boston}, abstract = {Employer-provided pensions play an important role in assuring a comfortable retirement. In 1992, they accounted for about 20 percent of the total wealth of middle-income households aged 51-61, second only to Social Security. However, many workers still lack pension coverage. After increasing sharply in the post-World War II period, the percentage of the private sector workforce covered by an employer-sponsored pension plan at any given point in time has remained around 50 percent since the 1970s. This constancy obscures two major changes, however. First, pension coverage has increased for women and declined for men, primarily reflecting the increased earnings and labor force participation of women and a decline for men in union membership and employment in large manufacturing firms. Second, a major shift has occurred in the types of plans from defined benefit to defined contribution. Defined benefit plans generally provide retired workers with a set amount based on their salary history, while benefits under defined contribution plans depend on the accumulated amount in a worker{\textquoteright}s account. The shift to defined contribution plans reflects employment trends as well as conversion of plans{\textellipsis}}, keywords = {Employment and Labor Force, Income, Net Worth and Assets, Pensions}, url = {https://crr.bc.edu/briefs/how-important-are-private-pensions/}, author = {Alicia H. Munnell and Sund{\'e}n, Annika and Lidstone, Elizabeth} } @inbook {5123, title = {New Developments in the Economic Analysis of Retirement}, booktitle = {Handbook of labor economics. Volume 3C}, series = {Handbooks in Economics}, year = {1999}, note = {ProCite field[3]: Brown U; U PAProCite field[8]: eds.}, pages = {3261-3307}, publisher = {Elsevier Science, North-Holland}, organization = {Elsevier Science, North-Holland}, chapter = {49}, address = {Amsterdam; New York and Oxford}, keywords = {Consumption and Savings, Employment and Labor Force, Pensions, Retirement Planning and Satisfaction, Social Security}, url = {https://eml.berkeley.edu/~saez/course/lumsdaine-mitchell1999handbook.pdf}, author = {Lumsdaine, Robin L. and Olivia S. Mitchell}, editor = {Ashenfelter, Orley and Card, David} } @article {5367, title = {An Analysis of the Choice to Cash-Out, Maintain, or Annuitize Pension Rights at Job Change or Retirement}, year = {1998}, institution = {RAND}, keywords = {Pensions, Retirement Planning and Satisfaction}, url = {https://www.rand.org/content/dam/rand/pubs/drafts/2008/DRU1979.pdf}, author = {Michael D Hurd and Lee A. Lillard and Panis, Constantijn} } @article {5369, title = {The Impact of Pay Inequality, Occupational Segregation, and Lifetime Work Experience on Retirement Income of Women and Minorities}, year = {1998}, note = {RDA}, abstract = {In this study the researchers review data on earnings and search for differences between men and women, as well as, differences between whites and minorities. Specifically, the researchers examine Social Security, employer-provided pensions, and financial assets, like homes. Observations and analysis of the data show that occupational segregation along with pay differences explain the vast majority of the retirement income differences. Most of the pay difference between men and women is in the form of pension size. Many interesting findings are given with possible explanations and ways of fixing the discrepancies. Cross-tabulations are done to show differences between the married and non-married, as well.}, keywords = {Demographics, Housing, Income, Net Worth and Assets, Pensions, Social Security, Women and Minorities}, author = {Olivia S. Mitchell and Phillip B. Levine and John W R Phillips} }