Pensions

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NBER WORKING PAPER SERIES

DEFINED CONTRIBUTION PLANS, DEFINED BENEFIT PLANS, AND THE ACCUMULATION OF RETIREMENT WEALTH James Poterba Joshua Rauh Steven Venti David Wise Working Paper 12597 http://www.nber.org/papers/w12597

NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 October 2006

We are extremely grateful to Tonja Bowen for extraordinary and tireless research assistance, to Gary Engelhardt and Anil Kumar for graciously providing us with tabulations from their HRS Defined Contribution Plan imputation algorithm, to Paul Bingley, Peter Diamond, Gary Engelhardt, Jon Gruber, Helena Stolyarova, and many seminar participants for helpful comments, and to the National Institute of Aging for research support under grant number P01 AG005842. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. © 2006 by James Poterba, Joshua Rauh, Steven Venti, and David Wise. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source.

Defined Contribution Plans, Defined Benefit Plans, and the Accumulation of Retirement Wealth James Poterba, Joshua Rauh, Steven Venti, and David Wise NBER Working Paper No. 12597 October 2006 JEL No. J14,J26,J32 ABSTRACT The private pension structure in the United States, once dominated by defined benefit (DB) plans, is currently divided between defined contribution (DC) and DB plans. Wealth accumulation in DC plans depends on the participant's contribution behavior and on financial market returns, while accumulation in DB plans is sensitive to a participant's labor market experience and to plan parameters. This paper simulates the distribution of retirement wealth, as well as the average level of such…...

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