We analyze the risks and rewards of moving from an unfunded defined benefit pension sys-tem to a funded plan for civil servants in Germany, allowing for alternative strategic contribu-tion and investment patterns using a Monte Carlo framework. For this purpose, we integrate traditional pension...

Public employee pension systems have traditionally been of the pay-as-you-go defined benefit (DB) variety, where retiree payments are financed by taxes (contributions) levied on the working generation. The same holds for Germany, where civil servants are promised a (mostly) unfunded,...

Retirees confront the difficult problem of how to manage their money in retirement so as to not outlive their funds while continuing to invest in capital markets. We posit a dynamic utility maximizer who makes both asset location and allocation decisions when managing her retirement financial...

This paper shows how lifelong survival-contingent payouts can enhance investor wellbeing in the context of a portfolio choice model which integrates uninsurable labor income and asymmetric mortality expectations. Our model generates optimal asset location patterns indicating how much to hold in...

Retirees must draw down their accumulated assets in an orderly fashion so as not to exhaust their funds too soon. We derive the optimal retirement portfolio from a menu that includes payout annuities as well as an investment allocation and a withdrawal strategy, assuming risk aversion,...

Many retirees hope to continue earning capital market rewards on their saving while avoiding outliving their funds during retirement. We model a dynamic utility maximizing investor who seeks to benefit from holding both equity and longevity insurance. She is free to adjust her portfolio...

We examine individuals' self-reported willingness to exchange part of their Social Security inflation-indexed annuity benefit for an immediate lump-sum payment, using an experimental module in the 2004 Health and Retirement Study. Our first finding is that nearly three out of five respondents...

Some research has suggested that companies with defined benefit (DB) pensions are sometimes significantly misvalued by the market. This is because the measures of pension cost and pension net liabilities embedded in financial statements, taken at face value, can provide a very misleading picture...

The present paper introduces a new dataset, the Rand American Life Panel (ALP), which offers several appealing features for an analysis of financial literacy and retirement planning. It allows us to evaluate financial knowledge during workers' prime earning years when they are making key...

Most workers in defined contribution retirement plans are inattentive portfolio managers: only a few engage in any trading at all, and only a tiny minority trades actively. Using a rich new dataset on 1.2 million workers in over 1,500 plans, we find that most 401(k) plan participants are...