The Intergenerational Transfer of Public Pension Promises
The value of pension promises already made by US state governments will grow to approximately $7.9 trillion in 15 years. We study investment strategies of state pension plans and estimate the distribution of future funding outcomes. We conservatively predict a 50% chance of aggregate underfunding greater than $750 billion and a 25% chance of at least $1.75 trillion (in 2005 dollars). Adjusting for risk, the true intergenerational transfer is substantially larger. Insuring both taxpayers against funding deficits and plan participants against benefit reductions would cost almost $2 trillion today, even though governments portray state pensions as almost fully funded.
|Date of creation:||Sep 2008|
|Date of revision:|
|Note:||AG AP CF PE|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Zvi Bodie, 1988. "Pension Fund Investment Policy," NBER Working Papers 2752, National Bureau of Economic Research, Inc.
- Mitchell, Olivia S & Smith, Robert S, 1994.
"Pension Funding in the Public Sector,"
The Review of Economics and Statistics,
MIT Press, vol. 76(2), pages 278-90, May.
- Joachim Inkmann & David Blake, 2004. "Liability valuation and optimal asset allocation," LSE Research Online Documents on Economics 24754, London School of Economics and Political Science, LSE Library.
- Sundaresan, Suresh & Zapatero, Fernando, 1997. "Valuation, Optimal Asset Allocation and Retirement Incentives of Pension Plans," Review of Financial Studies, Society for Financial Studies, vol. 10(3), pages 631-60.
- Giertz, J. Fred & Papke, Leslie E., 2007. "Public Pension Plans: Myths and Realities for State Budgets," National Tax Journal, National Tax Association, vol. 60(2), pages 305-23, June.
- Daniel Bergstresser & Mihir Desai & Joshua Rauh, 2006. "Earnings Manipulation, Pension Assumptions, and Managerial Investment Decisions," The Quarterly Journal of Economics, MIT Press, vol. 121(1), pages 157-195, 02.
- Joshua D. Rauh, 2006. "Investment and Financing Constraints: Evidence from the Funding of Corporate Pension Plans," Journal of Finance, American Finance Association, vol. 61(1), pages 33-71, 02.
- Deborah Lucas, 2007. "Valuing & Hedging: Defined Benefit Pension Obligations - The Role of Stocks Revisited," Money Macro and Finance (MMF) Research Group Conference 2006 169, Money Macro and Finance Research Group.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:14343. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.