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Factors affecting retirement income
... Types of defined contribution plans include: money purchase pension plans, simplified employee pension plan (SEP), profit sharing plan for private employees, 401(k) plan, stock bonus plan, thrift plan, employee stock ownership plan (ESOP), 457 plans for employees of state and local government, and 403(b) plans for non-profit groups such as teachers and hospital employees. Savings and thrift plans are the most prevalent type of defined contribution plan (Wiatrowski, 1993). Employees bear investment risk in defined contribution plans because they select their own funds from choices offered by the employer and determine the distribution among the funds. ...
... Defined contribution plans establish individual accounts for each employee and the emphasis is on accumulating funds, rather than determining future pension payments. The value of the account--the accumulation of employer and employee contributions and investment earnings--at any given time is known (Wiatrowski, 1993). ...
... In many companies, continued employment yields no additional benefits once a pre-determined age limit is reached. Pension plans rarely provide actuarial increases in benefits to employees who choose to work beyond retirement age (Wiatrowski, 1993). Ippolito (1990) noted that since 1965, pension plans generally have changed rules in favor of encouraging earlier retirement. ...
The study examined factors associated with the amount of defined contribution retirement funds using the 1992 Survey of Consumer Finances. Couples with larger amounts of income and smaller amount of nonfinancial assets had larger amounts of defined contribution funds. Also, the funds increased as years of employment and employer contribution rate increased. Households with lower levels of education, less skilled occupations, and with respondents who were unwilling to take financial risks, or who were Black and Hispanic had smaller amounts of defined contribution funds, all other things equal. Most households 30 or more years from retirement had predicted fund levels of zero.
... Summary of Private-Sector Qualified Defined Benefit and Defined Contribution Plans and Participants, Selected Years 19751975198019851990199219931997 show similar trends. The number of active participants increased from 31 million in 1975 to 52 million in 1998. ...
... 12 At the same time, assets in DC plan rose from $74 billion to nearly $2.1 trillion-an increase in the relative share for DC assets with respect to all assets in qualified plans from 28 percent (1975) to 52 percent (1998). Key points thus far discussed with respect to comparative trends in Summary of Private-Sector Qualified Defined Benefit and Defined Contribution Plan Trends, Selected Years 19751975198019901991199219931997 ($ billions) plans), Figure 4b (active participants), and Figure 4c (assets). Assets in 401(k) plans, a subset of DC plans, rose from nearly $92 billion in 1984 to more than $1.5 trillion in 1998-an amount equal to 38 percent of all private assets and 74 percent of all private DC plan assets ( Figure 5). ...
... Previous research in this field has concentrated on the change in the number of DB and DC plans, the number of participants, and assets and contributions to explain why plan sponsors may have moved from a DB model to one or more DC approaches in providing retirement income to their employees. Plans-Between 1985 and1993, an inverse relationship existed between the net change in primary DB plans and that in primary DC plans across plan sizes. The smaller the plan size, the greater the net increase in primary DC plans and the greater the net decrease in primary DB plans. ...
This Issue Brief examines trends in employment-based defined benefit (DB) and defined contribution (DC) pension plans since 1975. The analysis relies extensively on Form 5500 reports submitted by plan sponsors and published by the Department of Labor, although other sources of information are used. The Issue Brief goes beyond a general description of trends in the number of qualified private-sector plans, participants, and plan contributions and assets to examine why DB plans have steadily lost ground as the preferred plan type in recent decades. It explores several explanations for the increased use of DC plans and cites the research and lines of reasoning used to support them. These reasons include government regulation; changes in the work place; business environment and risk associated with funding and managing pension plans; firm size; increased global competition; and the successful marketing efforts of consultants and DC plan service providers. Developments in the public sector--on the federal and state and local levels--are discussed. The report addresses public policy implications raised by the movement away from DB toward DC (and hybrid) plan designs. Important issues in this context include possible sources of future retirement income; the impact of job stability on the portability of retirement benefits as well as benefit preservation and decumulation; and the extent to which alternative retirement plan designs satisfy the needs of both employer and employee. A closing section examines two topics of importance to retirement plans: changes in the tax code resulting from the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 and recent developments in corporate governance reform and financial disclosure. The report updates information contained in a 1997 EBRI analysis of the same subject, and includes sections on plan design and operational issues that are combined into an appendix to provide basic background on how retirement plans work.
... It is important to note, however, that this predicted change in coverage is not because there will be an increase in the absolute number of pension programs available. Rather, the change will be due to an increase in coverage from existing pension programs as a result of an influx of women entering the workforce during that 30-year period (Wiatrowski, 1993). Because defined benefit pension programs typically determine payouts based on pre retirement income levels and length of employment, individuals who change jobs (Wiatrowski, 1993) or have discontinuous work histories (Rix, 1990) can expect to receive smaller benefits. ...
... Rather, the change will be due to an increase in coverage from existing pension programs as a result of an influx of women entering the workforce during that 30-year period (Wiatrowski, 1993). Because defined benefit pension programs typically determine payouts based on pre retirement income levels and length of employment, individuals who change jobs (Wiatrowski, 1993) or have discontinuous work histories (Rix, 1990) can expect to receive smaller benefits. Therefore, women covered by these types of plans can expect to receive less in the way of pension income as compared to men, due to their lower pre-retirement earning levels and more discontinuous work histories (Talaga & Beehr, 1995). ...
The majority of research on -retirement income has focused on the level of support individuals receive (or can expect to receive) from pension programs, personal savings, and Social Security. This study was designed to complement that line of work by exploring the extent to which demographic factors (age, income gender, and educational background) are related workers' perceptions of financial stability in retirement. Results revealed that demographic variables were associated with individuals' perceptions of how difficult it will be to fund their retirement, and perceptions of the importance of income from personal savings, pension plans, Social Security, and family members. Findings are discussed in terms of how perceptions of income are related to income patterns experienced by cuuent retirees. Taken together, the results suggest the need to develop public policy initiatives and tailored retirement intervention programs that meet the needs of subgroups of American workers.
... Studies have shown that demographic factors also have a major impact on saving money, resulting in recommendations that most working households should save money, due to new reforms that may come in the future [Kotlikoff and Morris 1989, Wiatrowski 1993, Sterns, 1998, Ferraro 1999, Kleinman et al. 1999]. Additional research concluded that the economic growth of households is influenced by the financial behavior of individuals in managing their budget in relation to savings [Sonuga and Webley 1993, Furnham 1999, Karlan and Morduch 2009. ...
To reflect the financial situation of households, especially for emergencies, the main purpose of this research is to analyze financial behavior in relation to savings. This research explains the interaction
of minimum savings rules and committed forms of saving, which means that the use of personal budgets depends on financial behavior due to insecurity and the financial situation of families. The research
is consistent with some empirical findings on financial behavior in relation to savings, which affect the
growth or decline of the economy, because the lower the well-being of families the lower the economic growth or vice versa. The validation of the hypotheses was realized through the analysis of field findings, using the econometric model of savings in relation to financial behavior through factor analysis, reliability analysis and multiple regression analysis. The main finding of this research is the lack of financial behavior to save for emergencies. These findings are important in order for households to be aware
of financial behavior in relation to savings, because there is no emergency fund to cover their needs.
Key words: Savings, financial behavior, multiple regression analysis, households, growth and decline economics.
JEL codes: C1, R12, M4
... Additionally, the research by Sterns (1998), Kotlikoff and Morris (1989), Ferraro and Su (1999), Blank (1999), Kleinman, Anandarajan and Lawrence (1999) and Wiatrowski (1993) proved that demographic factors have great influence in retirement saving, highlighting the importance of savings for a person´s future, since nowadays, most young people who are working will need to save money due to new retirement reforms and that saved money will be used for their own support. ...
The purpose of this study is to describe the actions taken by college students to face their future retirement. For this, the test designed by the National Commission for the Protection and Defense of Financial Services Users (CONDUSEF) in Mexico was used, which has items related to financial knowledge, specifically topics about savings, emergency funds and life insurance, among others. The instrument was applied to 60 UPAV college students of different levels, during the school cycle of February-August 2018, in the city of Xalapa, Veracruz; it should be noted that the range of age was older than 21 but younger than 23 years old. The descriptive analysis showed results that lead us to believe that students have emergency funds (53%) but these are used to face unexpected situations (59%); also, students do not have life insurance, which could be concerning in their personal and family life if/when they have to face a present or future illness. Regarding car insurance, most of the respondents stated that they do not own one, besides considering it an unnecessary expense. One of the study limitations was the surveyed population; hence the need to widen this research to encompass more students from such geographical area in order to obtain a wider outlook of said behavior.
... Understanding the motives that underline individual's retirement saving practices is important because many, if not most future retirees from private sector, will need to rely on personal savings to maintain a reasonable replacement income. (Sterns 1998;Kotlikoff & Morris 1989;Ferraro & Su 1999;Blank 1999; Kleinman, Anandarajan and Lawrenece 1999;Wiatrowski 1993). ...
... Wistrowski [29] estimated that the percentage of Americans supported by pension plans will increase from 55% in 1988, to 88% by the year 2018. It can be claimed as positive steps towards improving future retiree's financial stability. ...
Since many people may spend much of their lifetime after long employment period, good planning prior retirement is related significantly to life satisfaction after retirement. In Malaysia, there are 1.2 million civil servants working in various ministries and agencies. Study by Malaysian Employers Federation's (MEF) revealed that in average 100,000 employees retires every year, from both the public and private sectors. What makes it frightening is only 5% of Malaysians are prepared for retirement. Despite a growing awareness for the need to prepare for retirement, many people do not translate their plans into actions. Therefore, this research intended to measure gender differences in terms of financial readiness for the retirement. Questionnaires were collected from 110 sample of respondents from Majlis Daerah Kuala Langat (MDKL). Independent sample t-test shows that only two factors are significant between gender in terms of financial readiness for retirement which are personal savings and pension scheme. These two factors are identified by both male and female respondents as the most contributing factors towards financial readiness for retirement among public sector employees. The finding is hoped to give significance contributions in terms of financial preparation for retirement among public sector employees.
... The need to save for retirement is an additional concern (Malroutu & Xiao, 1995;Merrill Lynch, Pierce, Fenner & Smith Incorporated, 1995). Older women, especially those who are divorced or widowed, are frequently less well-off financially (Wiatrowski, 1993). ...
The purpose of the study was to examine cash flow and credit use three months after participants completed a series of women's financial information workshops. Being older, having feelings of satisfaction about finances, and using the program workbook were associated with use of a spending plan, a bill paying system, limiting credit card use, and saving regularly. Educators should include discussion of the importance of feelings and attitudes in changing practices related to cash flow and credit use. Participants should be encouraged to complete workbook exercises during and after the workshops. © 1996, Association for Financial Counseling and Planning Education.
... One subset of variables give averages of pension (plus annuity), Social Security retirement, and earned income, as well as all other household income and net wealth of the household (each divided by 1000). Increases in these income and wealth variables, often used to directly measure economic well-being (see Wiatrowski, 1993), are expected to increase subjective well-being. The other variables capture the type of pension a retiree has. 4 Given that income from and wealth of pensions are controlled for, it is hypothesized that these variables proxy for the riskiness of pensions. ...
This paper examines a wide range of determinants of retiree well-being of retirees. Using data from the 2000 Health and Retirement Study, increases in economic factors such as income lead to higher well-being, although relative income has a larger effect than absolute income. The strongest predictors are the voluntariness of entering retirement, pension characteristics, and health. Retirees “forced” to retire or have defined contribution pensions or bad health have significantly lower well-being. The results suggest a more nuanced approach in addressing retiree well-being than just a focus on the economic well-being of retirees.
... The buying power of most pensions is reduced over time due to inflation. In 1989-90, less than 5% of full-time employees covered by a defined benefit pension were provided cost-of-living adjustments (Wiatrowski, 1993). Therefore, private household savings should become an increasing component of retirement income. ...
This study examines the effect of age on risk tolerance. The life-cycle investment hypothesis is tested using the 1983-89 panel of the Survey of Consumer Finances. Household wealth is defined as the sum of human capital and net worth. Risk tolerance is measured by the ratio of risky assets to total wealth. Risk tolerance increases with age when other variables are controlled. The proportion of households in the U.S. headed by someone 65 and older is expected to rise from the 1996 level of 22% (U. S. Bureau of the Census, 1997, Table 70) to as high as 40% by the year 2040 (Lumsdaine & Wise, 1990). This dramatic increase in the proportion of elderly households will result in part from the aging of the baby-boom generation, born between 1946 and 1962. Consequently, the adequacy of retirement income is becoming a matter of national concern. The buying power of most pensions is reduced over time due to inflation. In 1989-90, less than 5% of full-time employees covered by a defined benefit pension were provided cost-of-living adjustments (Wiatrowski, 1993). Therefore, private household savings should become an increasing component of retirement income.
... Understanding the motives that underlie individuals' retirement saving practices is important because many, if not most future retirees, will need to rely on personal savings to maintain a reasonable replacement income (Sterns, 1998;Kotlikoff & Morris, 1989;Ferraro & Su, 1999;Blank, 1999;Kleinman, Anandarajan & Lawrence, 1999;Wiatrowski, 1993). Much of the literature on retirement saving focuses on the influence of demographic factors. ...
The purpose of this study is to explore the extent to which individuals' knowledge of retirement planning, future time perspective, and financial risk tolerance influence retirement saving practices. A total of 270 young working adults participated in the study. Regression analyses reveal that each of the three variables is predictive of saving practices, and they interact with one another as well. From an applied perspective, the findings suggest that counseling and intervention efforts aimed at pro-moting retirement saving should differentially target individuals on the basis of these three psycho-logical dimensions.
... There are at least two avenues through which pensions may affect life satisfaction. For many retirees, pensions provide a significant percentage of income in retirement (Wiatrowski 1993) and so their generosity should affect the happiness of the retired. Furthermore, while absolute income from pensions is certainly important in the determination of life satisfaction, relative income (how one worker's income from his/her pensions compares to income that otherwise similar workers get from their pensions) may also be important. ...
While previous economic research focuses on the financial well-being of retirees, this paper examines the determinants of overall well-being of retirees. Using data from the 2000 Health and Retirement Study, the strongest predictor of retirement well-being is the reason for entering retirement. If individuals were "forced" to retire, their well-being is significantly lower than those who chose to retire. This indicates the importance of expectations on retirement satisfaction. Additionally, health, current income, type of employer pension, and comparison retirement income have important roles in determining overall well-being.
... Foremost among other predictors of post-retirement well-being are health and finances (Bossé et al., 1991;Wiatrowski, 1993). For respondents' health we use five single-item indicators, namely self-rated health, change in self-rated health, limitations in activities of daily living (ADLs), change in ADLs, and whether or not they ever had psychiatric problems (1 = yes, 0 = no). ...
This study explores how grandchild care in conjunction with grandparents' retirement affects depressive symptoms, using data from the Health and Retirement Survey. The findings demonstrate that retirement moderates the influence of grandchild care obligations on well-being, measured by depressive symptoms. For retired men, freedom from grandchild care obligations is associated with heightened well-being. Among women, continued employment seems to protect against potential negative effects of extensive grandchild care obligations on well-being. The results for men seem most in line with the argument that family care obligations spoil retirement, whereas the results for women suggest a scenario that is most compatible with the role enhancement thesis.
... Many financial planning models have the worker designate a retirement date, and then project what a worker's retirement income would have to be to sustain the lifestyle during retirement to which he or she is accustomed. The most popularly quoted rules ૾ The work on this paper was funded in part by a Summer Research Grant from the RIT College of Business. of thumb are that a worker would need a retirement income equal to 60 to 70% of preretirement income (see, e.g., Wiatrowski, 1993). This is known as the replacement ratio. ...
The decision to retire or work one more year is quite complex. One factor that plays a role in this decision is the net salary derived from working one more year. The type of pension a person has, defined benefit or defined contribution, will influence whether the net salary is larger than, equal to, or less than the stated salary. The larger the net salary relative to the stated salary, the more likely an employee is to continue working. This paper defines the net salary percentage for each type of pension plan and looks at empirical estimates for these values.
From antiquity to modernization, the budget is portrayed as one of the main factors in economic and social life. This paper analyzes the relationship between education and budget management as a necessity for well-being and financial stability. This shows that the use of knowledge during the budget cycle management depends on the education and combination of many factors coming from the environment where the individual or family operates. Here it is explained how Cluster and MDS analysis in interaction with other statistical tests explain the similarities or the differences between the observation groups from Kosovo, Western Balkan countries and European Countries (KO & EU & WBC), related to emergency funds, saving, registration of transactions of revenues or expenditures, financial decision-making, control and budgetary practices. The research is argued from empirical findings giving a new approach through detailed recommendations for variables of observation groups on the personal budget.
From 1992-93 to 2005, there was an overall drop in retirement coverage; participation in defined contribution plans eclipsed that in defined benefit plans, and the features of retirement plans changed in tandem with the declining participation.
Income replacement after retirement is an increasingly important economic policy area of social concern. This study examines three different measures of replacement income, including the effect of taxes on the estimated replacement rates of new retirees in the Health and Retirement Study. An analysis of replacement rates on average and in different parts of the distribution shows that married, older, and voluntary retirees have the highest replacement rates and that income from pensions and Social Security still form the majority of retirement income replacement.
Both the household-based Current Population Survey and the establishment-based Employee Benefits Survey have strengths and limitations with respect to collecting information on health and retirement benefits: demographic information is best obtained from household surveys; details of benefit plans are best collected from establishments.
During the mid- to late-1990s, unemployment fell and employment rose; the job-search rate of the employed also declined, although many employed persons still searched for new jobs.
The purpose of this study is to analyze the proportion of risky assets in retirement savings based on total financial situation of household, household characteristics and risk tolerance. In addition, having a high proportion of risky assets in the retirement savings might guarantee high accumulation of retirement wealth because of the long-run superiority of stocks. This study used data from the 1992 Survey of Consumer Finances. In this study, non-retired households aged 70 years or younger were selected, resulting in a sample of 1,578 households. The dependent variable of this study was the proportion of retirement savings (funds) invested in risky assets of households. In a Tobit analysis the effects of age, education, household type, and risk tolerance on the risky assets shares in retirement savings were significant. People aged 41 - 50 had lower proportion of risky assets in their retirement funds compared to younger groups. The shares of risky assets in retirement funds significantly increased with the educational level. Compared to people who were unwilling to take any risk, people who were willing to take average or above average risk had significantly more risky assets in their retirement savings. This result confirms the important role of investors’ risk tolerance level on their portfolio decision in retirement funds. Female-headed households had a significantly lower proportion of risky assets compared to married couple households. The effects of net worth, liquid assets, and non-investment income were not significant.
Economic well-being in retirement has been of increasing interest for economic researchers. The policy implications are large. As the baby boom generation nears retirement, understanding the factors that determine economic well-being enables policymakers to evaluate and possibly reform present retirement institutions, such as public and private pension programs. Of particular interest in this field has been the focus on retirement income adequacy, that is, the financial resources retirees need to be above some minimal level...
This study compares the retirement plans and preferences of a recent sample of 3,500 men and women of pre-retirement age-50 to 64. The data suggest that a minority of older workers expect to retire earlier than they really want to, and that many would delay retirement if they faced different terms and conditions of employment. Although most older Americans cannot or do not want to work, many do, and they represent a significant underutilized labor market resource.
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