The present paper numerically prices a resettable guarantee of a salary-connected individual pension account (IPA). The results indicate that a principal guarantee without a reset feature is not worth much unless the volatility of assets in the IPA is huge, while the death benefit contributes a very small proportion to the guarantee value. Deferred proportional funding is an alternative to reducing problems from the difficulty in modeling salary behavior, because the required deferred proportional cost is impacted less by the salary behavior. Moreover, if the lapse from a guarantee is possible, then the guarantee is not necessarily more valuable for a younger individual.

State and local pension plans are increasingly moving from the traditional defined benefit (DB) model to non-DB models that generally allow for participant-directed investment. This shift has important implications for the management of the more than US$3 trillion in assets held to finance public employee retirement benefits. To investigate these implications, we introduce new data from a nationwide survey of public DB and non-DB plans and a unique data set on thousands of individual investors in the state of Florida's defined contribution (DC) plan. Using these sources, we explore how participant involvement in the public sector affects the distribution of asset class allocations, management fees, investment outcomes, and portfolio rebalancing at both the individual and aggregate levels. We found that there is little difference between the DB and non-DB plans in terms of asset mix, returns, and fees, except that DB plan have greater access and allocations to alternative investments. We also found that while the average individual DC plan participant allocated their asset similarly to the DB plan, black females and older white males, on average, invested on opposite tails of the risk spectrum.

To contribute to a retirement plan (barring an increase in income), an individual must either reduce consumption or increase debt. Using data from the 2004 wave of the Survey of Income and Program Participation, we examine the extent to which contributing to 401(k)-type accounts leads to an increase in short-term financial difficulties, particularly among low-income individuals. After instrumenting for plan take-up, we find that contributing to a 401(k) plan appears to have a small positive impact on the presence of any material hardship and debt holding among the lowest income quintiles, though that effect diminishes further up the income distribution.

We argue that we should see a negative relationship between the share of risky assets in the default fund of a defined contribution (DC) pension plan and the average plan member age if trustees design the default fund in line with predictions from the life-cycle portfolio choice theory. Adoption of the default fund should be low in DC plans with high member age dispersion if default funds are indeed designed for the average plan member and members become aware of this. From analyzing a panel dataset of Australian DC pension plans, we obtain results that are consistent with both hypotheses.

We investigate the impact of receiving a public pension on total expenditures, food expenditures, and private transfers of the elderly in South Korea. Using a natural experiment that occurred in 1999, we are able to explore the impacts of a large public pension program expansion which newly incorporated people who had been self-employed, unemployed, and out of the labor force. We find that receipt of a public pension did not allow the elderly to increase total expenditures or food expenditures because the expansion of public pensions largely crowded out financial transfers from adult children and/or own siblings.