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Private Pensions, Retirement Wealth and Lifetime Earnings

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Abstract

This paper investigates the effect of private pensions on the retirement wealth distribution. The model incorporates stochastic private pension coverage into a life- cycle model with stochastic earnings. The predictions of the calibrated model are compared to the distribution of retirement net worth and private pension wealth in the PSID. While private pensions lead to higher wealth inequality and reduces the lifetime earnings - retirement wealth correlation, the model still generates too little wealth inequality. However, when we extend the model to include heterogeneous life-cycle earnings profiles and permanent return differences across households, we find that the model largely accounts for the sizeable variation in retirement wealth.

Suggested Citation

  • James MacGee & Jie Zhou, 2010. "Private Pensions, Retirement Wealth and Lifetime Earnings," University of Western Ontario, Economic Policy Research Institute Working Papers 20102, University of Western Ontario, Economic Policy Research Institute.
  • Handle: RePEc:uwo:epuwoc:20102
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    Cited by:

    1. Claudio Campanale & Marcello Sartarelli, 2018. "“Life-cycle Wealth Accumulation and Consumption Insurance"," CeRP Working Papers 186, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    2. Claudio Campanale, 2020. "Consumption insurance and education: A puzzle?," Working papers 069, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.

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    More about this item

    Keywords

    private pensions; Wealth inequality; retirement;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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