Working Paper: NBER ID: w13381
Authors: James Poterba; Steven Venti; David A. Wise
Abstract: The pension landscape in the U.S. has changed dramatically over the past 25 years. Saving through personal retirement accounts has become the principal form of retirement saving. We document the transition from a defined benefit system to a personal account system and show the effect it has had on wealth at retirement. We summarize results from other research we have done to project the growth of retirement assets over the next three decades. Our projections suggest that the advent of personal account saving will increase wealth at retirement for future retirees across the lifetime earnings spectrum.
Keywords: pensions; retirement savings; defined benefit plans; personal retirement accounts; 401(k) plans
JEL Codes: G11; G23; H55; J14; J32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| shift from defined benefit (DB) plans (J32) | increase in wealth at retirement for future retirees (J26) |
| increase in contributions to PRAs (H55) | increase in retirement assets (D14) |
| advent of PRAs (H12) | increase in retirement wealth across different income levels (D14) |
| financial market risks associated with PRAs (G19) | not outweigh job change risks in DB plans (J32) |
| increase in pension assets relative to earnings (H55) | improved capacity to replace pre-retirement income (J26) |