Wharton Pension Research Council Working Papers

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Working Paper

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This chapter documents the investment choices of workers outside their company pensions, focusing on a sample of respondents to the Health and Retirement Study (HRS). We first discuss the long-term trends in pension structure and stock market participation by households, including the long trend where traditional defined benefit (DB) pensions have been replaced by defined contribution (DC) pensions. Next we analyze how investment choices outside pension plans have been influenced by the shift in pension structure. Theory suggests that workers with DB plans might invest less conservatively outside of their pensions, yet the data show otherwise. Conversely, DC plan participants in the Health and Retirement Study (HRS) held more stock market investments outside their pension portfolios. This may be because workers with a greater preference for risk sort into jobs with DC plans. These results have implications for policy: for instance, some reformers would replace at least a portion of traditional social security benefits with personal accounts, more akin to DC plans. Our findings suggest that participants might respond to the increase in pension investment risk exposure by reallocating their non-pension portfolios toward more stock.


The published version of this Working Paper may be found in the 2007 publication: Redefining Retirement: How Will Boomers Fare?.

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Copyright/Permission Statement

All findings, interpretations, and conclusions of this paper represent the views of the authors and not those of the Wharton School or the Pension Research Council. © 2006 Pension Research Council of the Wharton School of the University of Pennsylvania. All rights reserved.


The authors thank Irena Dushi, Brigitte Madrian, Olivia S. Mitchell, and James Poterba for helpful comments.

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Economics Commons



Date Posted: 28 August 2019