Individual Financial Decisions in Retirement Saving Plans and The Provision of Resources for Retirement
Proposals for mandatory private saving accounts differ in the degree of investment discretion that they provide to individual savers, and in their provisions for annuitization of accumulated assets. With respect to investment choices, some argue that individuals must be prevented from investing too conservatively, and earning low returns over their accumulation period, while others argue that individuals should be protected from recklessly investing their retirement assets. With respect to annuitization, there is concern that individuals might not choose annuities and would thereby expose themselves to a risk of outliving their assets in a privatized system. This paper draws on the existing experience with 401(k) plans and other defined contribution pension plans to provide evidence on each of these issues. We find that the share of 401(k) plan assets held in corporate equities has increased substantially in recent years. We are only able to provide limited evidence on participant asset management, since many 401(k) plans have limited options in this regard. We do find, however, that a participant's education and income levels are related to asset allocation decisions, with less educated and lower income participants less inclined to invest in equity securities. We also analyze a unique data base on TIAA-CREF participants and find several attributes of annuitization behavior that seem inconsistent with standard behavior in the lifecycle model.
|Date of creation:||Sep 1996|
|Date of revision:|
|Publication status:||published as Privatizing Social Security. Feldstein, Martin, ed. pp. 85-105. (Chicago: University of Chicago Press, 1998)|
|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.:
- Richard P. Hinz & David D. McCarthy & John A. Turner, . "Are Women Conservative Investors? Gender Differences in Participant Directed Pension Investments," Pension Research Council Working Papers 96-17, Wharton School Pension Research Council, University of Pennsylvania.
- Feldstein, Martin, 1996.
"The Missing Piece in Policy Analysis: Social Security Reform,"
American Economic Review,
American Economic Association, vol. 86(2), pages 1-14, May.
- Martin Feldstein, 1996. "The Missing Piece in Policy Analysis: Social Security Reform," NBER Working Papers 5413, National Bureau of Economic Research, Inc.
- Martin Feldstein & Jeffrey B. Liebman, 2001.
NBER Working Papers
8451, National Bureau of Economic Research, Inc.
- John Laitner & F. Thomas Juster, 1993.
"New evidence on altruism: a study of TIAA-CREF retirees,"
Discussion Paper / Institute for Empirical Macroeconomics
86, Federal Reserve Bank of Minneapolis.
- Laitner, John & Juster, F Thomas, 1996. "New Evidence on Altruism: A Study of TIAA-CREF Retirees," American Economic Review, American Economic Association, vol. 86(4), pages 893-908, September.
- James M. Poterba & Steven F. Venti & David A. Wise, 1993.
"Do 401(k) Contributions Crowd Out Other Persoanl Saving?,"
NBER Working Papers
4391, National Bureau of Economic Research, Inc.
- Poterba, James M. & Venti, Steven F. & Wise, David A., 1995. "Do 401(k) contributions crowd out other personal saving?," Journal of Public Economics, Elsevier, vol. 58(1), pages 1-32, September.
- Poterba, J.M. & Venti, S.F. & Wise, D.A., 1992.
"401(k) Plans and Tax-Deferred Savings,"
92-14, Massachusetts Institute of Technology (MIT), Department of Economics.
- Bodie, Zvi & Merton, Robert C. & Samuelson, William F., 1992.
"Labor supply flexibility and portfolio choice in a life cycle model,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 16(3-4), pages 427-449.
- Zvi Bodie & Robert C. Merton & William F. Samuelson, 1992. "Labor Supply Flexibility and Portfolio Choice in a Life-Cycle Model," NBER Working Papers 3954, National Bureau of Economic Research, Inc.
- Friedman, Benjamin M & Warshawsky, Mark J, 1990. "The Cost of Annuities: Implications for Saving Behavior and Bequests," The Quarterly Journal of Economics, MIT Press, vol. 105(1), pages 135-54, February.
- Poterba, James M & Venti, Steven F & Wise, David A, 1994. "Targeted Retirement Saving and the Net Worth of Elderly Americans," American Economic Review, American Economic Association, vol. 84(2), pages 180-85, May.
- Peter Diamond, 2004. "Social Security," American Economic Review, American Economic Association, vol. 94(1), pages 1-24, March.
- Benjamin M. Friedman & Mark Warshawsky, 1985. "The Cost of Annuities: Implications for Saving Behavior and Bequests," NBER Working Papers 1682, National Bureau of Economic Research, Inc.
- Salvador Valdés & Peter Diamond, . "Social Security Reforms in Chile," Documentos de Trabajo 161, Instituto de Economia. Pontificia Universidad Católica de Chile..
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:5762. 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.