| In the last thirty years there has been a remarkable change in the manner in which people save for their retirement. Instead of relying on their employer's traditional defined benefit plan, workers often have a defined contribution plan for which they are responsible for contributing and investing. The contributions and returns on the plan determine the worker's retirement income. This dissertation addresses two of the most pressing issues that the transformation to private pension accounts has raised. Do these plans expose workers to too much retirement income volatility and do they provide adequate saving incentives? The first paper estimates the welfare of a typical worker who chooses between a defined benefit and defined contribution plan, after accounting for all sources of risk, particularly job turnover. It is found that job mobility increased in the mid 1990s and this has made defined contribution plans more desirable. The second paper estimates the variance in annuity premiums, which is another potential source of risk when it comes to defined contribution plans. It is found that annuity premiums can vary with the yield curve, thus this element of risk is not negligible. The third paper estimates to what degree race plays a role in how workers participate in, contribute to, and invest their private pension plan. It is found that each race responds differently to their demographic characteristics and employer incentives. This suggests that there is race-specific saving behavior. |
