Abstract

http://ssrn.com/abstract=2154628
 


 



Made Poorer by Choice: Worker Outcomes in Social Security vs. Private Retirement Accounts


Javed Ahmed


Board of Governors of the Federal Reserve System

Brad M. Barber


University of California, Davis

Terrance Odean


University of California, Berkeley - Haas School of Business

July 5, 2016


Abstract:     
Can the freedom to choose how retirement funds are invested leave workers worse off? Via simulation, we document that choice in stock v. bond allocation and type of equity investments in private accounts leads to lower utility and greater risk of income shortfalls relative to private accounts without choice. We also compare private account outcomes to currently promised Social Security benefits to demonstrate that a representative worker (an average wage earner) benefits more from private-account alternatives—with or without choice—than do most workers. Thus, representative worker outcome should not be used to assess population-wide benefits of private account alternatives.

Number of Pages in PDF File: 39

Keywords: Social Security, Private Retirement Accounts, Behavioral Finance

JEL Classification: H55, J25


Open PDF in Browser Download This Paper

Date posted: October 1, 2012 ; Last revised: July 7, 2016

Suggested Citation

Ahmed, Javed and Barber, Brad M. and Odean, Terrance, Made Poorer by Choice: Worker Outcomes in Social Security vs. Private Retirement Accounts (July 5, 2016). Available at SSRN: http://ssrn.com/abstract=2154628 or http://dx.doi.org/10.2139/ssrn.2154628

Contact Information

Javed Ahmed
Board of Governors of the Federal Reserve System ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-912-4649 (Phone)
202-452-5210 (Fax)
HOME PAGE: http://www.federalreserve.gov/research/staff/ahmedjavedi.htm

Brad M. Barber
University of California, Davis ( email )
Graduate School of Management
One Shields Avenue
Davis, CA 95616
United States
530-752-0512 (Phone)
530-752-2924 (Fax)

Terrance Odean (Contact Author)
University of California, Berkeley - Haas School of Business ( email )
545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States
510-642-6767 (Phone)
510-666-2561 (Fax)
HOME PAGE: http://www.haas.berkeley.edu/faculty/odean.html
Feedback to SSRN


Paper statistics
Abstract Views: 2,061
Downloads: 346
Download Rank: 62,604

© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollobot1 in 0.250 seconds