Author : Andrew Samwick
Publisher :
ISBN 13 :
Total Pages : 56 pages
Book Rating : 4.3/5 (91 download)
Book Synopsis How Will Defined Contribution Pension Plans Affect Retirement Income? by : Andrew Samwick
Download or read book How Will Defined Contribution Pension Plans Affect Retirement Income? written by Andrew Samwick and published by . This book was released on 1998 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: How has the emergence of defined contribution pension plans, such as 401(k)s, affected the financial security of future retirees? We consider this question using a detailed survey of pension formulas in the Survey of Consumer Finances. Our simulations show that average and median pension benefits are higher under defined contribution plans that for defined benefit plans. Defined benefit plans are slightly better at providing minimum benefits, but for plausible values of risk aversion, a defined contribution plan drawn randomly from those available in 1995 is still preferred to a defined benefit plan drawn randomly from those available in 1983. This result is robust to different assumptions regarding the spending of defined contribution balances between jobs, equity rates of return, and the date of retirement. In short, we suggest that defined contribution plans can strengthen the financial security of retirees.