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Retirement Wealth (retirement + wealth)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	75%

Selected Abstracts

RETIREMENT WEALTH AND LIFETIME EARNINGS,

INTERNATIONAL ECONOMIC REVIEW, Issue 2 2007
Lutz Hendricks
This article argues that a satisfactory theory of wealth inequality should account not only for the marginal distribution of wealth, but also for the joint distribution of wealth and earnings. The article describes the joint distribution of retirement wealth and lifetime earnings in the Panel Study of Income Dynamics. It then evaluates the ability of a stochastic life-cycle model to account for key features of this distribution. The life-cycle model fails to account for three key features of the data. (1) The correlation between lifetime earnings and retirement wealth is too high. (2) The wealth gaps between earnings rich and earnings poor households are too large. (3) Wealth inequality among households with similar lifetime earnings is too small. Models in which households differ in rates of return or time preferences account much better for the joint distribution of retirement wealth and lifetime earnings. [source]

AUSTRALIAN EARLY RETIREMENT TAX BIASES PRIOR TO JULY 2007 AND THE LIKELY EFFECTS OF TAX REFORM ON RETIREMENT PLANS

ECONOMIC PAPERS: A JOURNAL OF APPLIED ECONOMICS AND POLICY, Issue 3 2008
BRUCE FELMINGHAM
We develop a simulation model explaining the accrual of retirement wealth gained from working one year beyond retirement and from this calculate an implicit tax rate on the additional year's work. We find that the pre-July 2007 Australian tax on retirement benefits was biased in favour of ages 59 and less, while the implicit rate was positive on retirement past 59. We also use the results of a national survey of 2,500 households (ASRAM SURVEY) to determine the likely response to the tax changes implemented in July 2007 and find that half those sampled are either very likely or likely to change their expected retirement dates in response to the tax changes. [source]

RETIREMENT WEALTH AND LIFETIME EARNINGS,

Florida's Pension Election: From DB to DC and Back

JOURNAL OF RISK AND INSURANCE, Issue 3 2004
Moshe A. Milevsky
During the year 2002, the State of Florida's 600,000 public employees were given the choice of converting their traditional defined benefit (DB) pension plan into an individual-account defined contribution (DC) plan with full control over asset allocation and investment decisions. To mitigate some of the risk and uncertainty in the decision, the State granted each employee electing the DC plan an additional option to switch back (i.e., change their mind once) at any point prior to retirement. This option has been labeled the 2nd election by the State and the cost of reentry is fixed at the accumulated benefit obligation of their pension entitlement, which is the present value of the life annuity. Our article presents some original analytic insights relating to the optimal time and financial value of this unique 2nd election. Although our model is deterministic in nature, we believe that it provides a number of intuitive insights that are quite robust. Our results can be contrasted with Lachance, Mitchell, and Smetters (2003). We estimate that the increase in retirement wealth that arises from having the 2nd election is equivalent to at most 30 percent in future value, and only when utilized optimally. Furthermore, for most State employees above the age of 45, the 2nd election has little economic value because the DB plan dominates the DC plan from day one. Of course, it remains to be seen what percent of Florida's 600,000 employees will elect to behave rationally with their newfound pension autonomy. [source]