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Guaranteeing retirement income (Florida)

Record Type:	Electronic resources : Monograph/item
Title/Author:	Guaranteeing retirement income (Florida)
Author:	Lachance, Marie-Eve.
Description:	106 p.
Notes:	Adviser: Olivia S. Mitchell.
Notes:	Source: Dissertation Abstracts International, Volume: 65-03, Section: A, page: 1055.
Contained By:	Dissertation Abstracts International65-03A.
Subject:	Economics, Finance.
Online resource:	http://pqdd.sinica.edu.tw/twdaoapp/servlet/advanced?query=3125850
ISBN:	0496731394

Guaranteeing retirement income (Florida)
Lachance, Marie-Eve.

Guaranteeing retirement income (Florida) [electronic resource] - 106 p.

Adviser: Olivia S. Mitchell.

Thesis (Ph.D.)--University of Pennsylvania, 2004.

In the first chapter, we study the case of the Florida Retirement System (FRS) which granted their employees an option to switch from the DC to the DC plan. A theoretical framework is developed to analyze the option design and how employee characteristics influence the option's cost. Since benefits accumulate at different rates in the DB and DC plans, the option creates an arbitrage opportunity. We show that the cost of the option can be significant if it is exercised optimally. We also note that while the option is costly, it does not protect the employee against investment risk.

ISBN: 0496731394Subjects--Topical Terms:

212585
Economics, Finance.

Guaranteeing retirement income (Florida)
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500 $a Source: Dissertation Abstracts International, Volume: 65-03, Section: A, page: 1055.
502 $a Thesis (Ph.D.)--University of Pennsylvania, 2004.
520 # $a In the first chapter, we study the case of the Florida Retirement System (FRS) which granted their employees an option to switch from the DC to the DC plan. A theoretical framework is developed to analyze the option design and how employee characteristics influence the option's cost. Since benefits accumulate at different rates in the DB and DC plans, the option creates an arbitrage opportunity. We show that the cost of the option can be significant if it is exercised optimally. We also note that while the option is costly, it does not protect the employee against investment risk.
520 # $a In the last twenty years, a growing number of defined benefit (DB) pension plans have been replaced by defined contribution (DC) plans. With DC plans, the individual is exposed to investment risk and this dissertation examines three approaches that have been suggested to manage this risk.
520 # $a In the second chapter, we examine the case of guarantees in the context of a social security reform that includes Individual Accounts. When a pension guarantee has economic value to the participant, it will have economic costs. We illustrate how these costs can be important and vary significantly with time horizon, investment mix, and guarantee design. Our findings indicate that plan designers and budget analysts would do well to recognize such costs and identify how they can be financed.
520 # $a In the third chapter, we suggest that the worker can replicate the payments of a guarantee by adjusting his retirement date and generating additional labor income. Accordingly, we introduce and solve a model of optimal portfolio choice with a flexible retirement date. With this strategy, the worker can "self-insure" against investment risk as long as his ability to delay retirement is not impaired. Our results show that retirement flexibility enhances the capacity to assume investment risk. If labor supply flexibility is lost at retirement, the allocation to the risky asset should suddenly be reduced in consequence. Finally, our model can be used to show that workers who are eager to retire have an incentive to invest in risky assets.
590 $a School code: 0175.
650 # 0 $a Economics, Finance. $3 212585
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791 $a Ph.D.
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