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Risk tolerance and retirement income composition

Published online by Cambridge University Press:  09 May 2008

JONATHAN A. SCHWABISH  and
JULIE H. TOPOLESKI
JONATHAN A. SCHWABISH
Affiliation:
Congressional Budget Office (e-mail: [email protected])
JULIE H. TOPOLESKI
Affiliation:
Congressional Budget Office (e-mail: [email protected])
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Summary

Proposed changes to the Social Security system will affect the financial risk workers will face in their retirement differently across the income distribution. This study examines levels of financial risk workers face at different points in the lifetime earnings distribution. To do so, we use a microsimulation model that projects individual demographic and economic characteristics within the context of the Social Security system and the macroeconomy to assess the impact of two policy changes on the levels of lifetime benefits available to current and future retirees. Further, we incorporate data on pensions and savings to illustrate differences in the level and distribution of retirement funds across the earnings distribution. This exercise allows us to assess the financial risk workers face in their retirement, both within the Social Security system itself and within a broader view of the stream of total available retirement funds. We also use survey data to show that low earners are the least willing to tolerate such risk.

Type
Articles
Information
Journal of Pension Economics & Finance , Volume 8 , Issue 2 , April 2009 , pp. 131 - 151
Copyright
Copyright © 2008 Cambridge University Press

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