Individual Risk in an Investment-Based Social Security System

Feldstein, Martin; Ranguelova, Elena

doi:10.1257/aer.91.4.1116

Cited by 106 publications

(35 citation statements)

References 6 publications

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“…4 In accordance with Feldstein and Ranguelova (2001) and others, we suggest that the decision to start prefunding an initially unfunded public pension plan requires attention to the cost risks associated with funding and investing in capital markets. Such a strategy may be considered only if these risks can be held to acceptable levels.…”

Section: Valuing Public Pension Liabilities In a Non-stochastic Framesupporting

confidence: 69%

Managing contribution and capital market risk in a funded public defined benefit plan: Impact of CVaR cost constraints

Maurer

Mitchell

Rogalla

2009

Insurance: Mathematics and Economics

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JEL classification: G11 G15 G2 G23 H3 H55 H71 J26 J32 a b s t r a c t Using a Monte Carlo framework, we analyze the risks and rewards of moving from an unfunded defined benefit pension system to a funded plan for German civil servants, allowing for alternative strategic contribution and investment patterns. In the process we integrate a Conditional Value at Risk (CVaR) restriction on overall plan costs into the pension manager's objective of controlling contribution rate volatility. After estimating the contribution rate that would fully fund future benefit promises for current and prospective employees, we identify the optimal contribution and investment strategy that minimizes contribution rate volatility while restricting worst-case plan costs. Finally, we analyze the time path of expected and worst-case contribution rates to assess the chances of reduced contribution rates for current and future generations. Our results show that moving toward a funded public pension system can be beneficial for both civil servants and taxpayers.

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Section: Valuing Public Pension Liabilities In a Non-stochastic Framesupporting

confidence: 69%

Managing contribution and capital market risk in a funded public defined benefit plan: Impact of CVaR cost constraints

Maurer

Mitchell

Rogalla

2009

Insurance: Mathematics and Economics

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“…Of course, on an actuarial present value basis, all values of AIR lead to equivalent annuity entitlements and there is no natural advantage to selecting one over the other. For an economic perspective on the mechanics of variable payout annuities, please see the paper by Feldstein and Ranguelova (2001) within the context of proposals for Social Security reform.…”

Section: The Simple Modelmentioning

confidence: 99%

The timing of annuitization: Investment dominance and mortality risk

Milevsky¹,

Young²

2007

Insurance: Mathematics and Economics

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“…Feldstein and Ranguelova (2001), for instance, dismiss the existing evidence and suggest a thought experiment to allow readers to choose the appropriate assumption to make concerning the magnitude of relative risk aversion.…”

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confidence: 99%

Relative Risk Aversion: What Do We Know?

Meyer

2005

J Risk Uncertainty

201

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The relative risk aversion measure that represents the risk preferences of a decision maker depends on the outcome variable that is used as the argument of the utility function, and on the way that outcome variable is defined or measured. In addition, the relationship between any two such relative risk aversion measures is determined by the relationship between the corresponding outcome variables. These well-known facts are used to adjust several reported estimates of relative risk aversion so that those estimates can be directly compared with one another. After adjustment, the significant variation in the reported relative risk aversion measures for representative decision makers is substantially reduced. Copyright Springer Science + Business Media, Inc. 2005risk aversion, relative risk aversion,

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Individual Risk in an Investment-Based Social Security System

Cited by 106 publications

References 6 publications

Managing contribution and capital market risk in a funded public defined benefit plan: Impact of CVaR cost constraints

Managing contribution and capital market risk in a funded public defined benefit plan: Impact of CVaR cost constraints

The timing of annuitization: Investment dominance and mortality risk

Relative Risk Aversion: What Do We Know?

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