Private Pensions, Retirement Wealth and Lifetime Earnings
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.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: Economic Policy Research Institute, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2|
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Web page: http://economics.uwo.ca/research/research_papers/epri_workingpapers.html
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