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Post-Retirement Adjustments in Defined Benefit Pensions

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  • Charles Brown

    (University of Michigan)

Abstract

Few private defined benefit pension plans commit to indexing benefits after a worker begins receiving them. Previous (now dated) research found that most plans did, nonetheless, make "voluntary" adjustments, which compensated for roughly 40 percent of the price increases experienced since retirement. In analyzing changes in pension benefits reported by HRS respondents between 1994 and 2008, I find annual increases that are about one third of the increase in the CPI. The increases are concentrated among respondents who report that their benefits are adjusted for inflation. They are larger for workers in public administration than in other industries; perhaps surprisingly, they are not larger in jobs covered by union contracts than those in the non-union sector. The HRS data also show that benefits paid out of defined contribution plans increased, again by roughly one third of the increase in consumer prices.

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File URL: http://www.mrrc.isr.umich.edu/publications/Papers/pdf/wp242.pdf
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Bibliographic Info

Paper provided by University of Michigan, Michigan Retirement Research Center in its series Working Papers with number wp242.

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Length: 22 pages
Date of creation: Dec 2010
Date of revision:
Handle: RePEc:mrr:papers:wp242

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  1. Steven G. Allen & Robert L. Clark & Daniel A. Sumner, 1984. "Post-Retirement Adjustments of Pension Benefits," NBER Working Papers 1364, National Bureau of Economic Research, Inc.
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