TY - JOUR
T1 - The market sensitivity of retirement and defined contribution pensions
T2 - Evidence from the public sector
AU - Gustafson, Matthew T.
N1 - Publisher Copyright:
© 2016 Elsevier B.V.
PY - 2017/1/1
Y1 - 2017/1/1
N2 - I provide evidence that defined contribution (DC) pensions make retirement more positively correlated with stock market returns as compared to defined benefits (DB) pensions. To identify the effect, I exploit the U.S. federal government's switch in 1984 from a DB pension system (CSRS) to a hybrid-DC pension system (FERS). I estimate that FERS exposes approximately 24% more pension wealth to the financial markets. Compared to untreated employees, employees treated with the hybrid-DC pension respond to a one standard deviation shock to quarterly market returns by adjusting their retirement date by approximately one month, approximately offsetting changes in DC pension wealth with labor income.
AB - I provide evidence that defined contribution (DC) pensions make retirement more positively correlated with stock market returns as compared to defined benefits (DB) pensions. To identify the effect, I exploit the U.S. federal government's switch in 1984 from a DB pension system (CSRS) to a hybrid-DC pension system (FERS). I estimate that FERS exposes approximately 24% more pension wealth to the financial markets. Compared to untreated employees, employees treated with the hybrid-DC pension respond to a one standard deviation shock to quarterly market returns by adjusting their retirement date by approximately one month, approximately offsetting changes in DC pension wealth with labor income.
UR - http://www.scopus.com/inward/record.url?scp=84996605647&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84996605647&partnerID=8YFLogxK
U2 - 10.1016/j.jpubeco.2016.11.008
DO - 10.1016/j.jpubeco.2016.11.008
M3 - Article
AN - SCOPUS:84996605647
SN - 0047-2727
VL - 145
SP - 1
EP - 13
JO - Journal of Public Economics
JF - Journal of Public Economics
ER -