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Pensions as Retirement Income Insurance

Zvi Bodie

Boston University - Department of Finance & Economics

April 1989

NBER Working Paper No. w2917

This paper develops the view that employer-sponsored pension plans are best understood as retirement income insurance for employees and from that perspective addresses a number of questions regarding the reasons for their existence, their design, and their funding and investment policies. The most important of these questions are: - Why do employers provide pension plans for their employees and why is participation usually mandatory? - Why is the defined benefit form of pension plan the dominant one rather than defined contribution? - Why are the payout options under most plans limited to life annuities? - Why are most plans integrated with Social Security? - Why don't corporate pension plans follow the extreme funding and asset allocation policies that seem to be optimal from the perspective of shareholder wealth maximization? - Why do employers often make ad hoc increases in pension benefits not strictly required under the formula in defined benefit plans? - Why don't private pensions offer inflation insurance?

Number of Pages in PDF File: 46

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Date posted: June 25, 2004  

Suggested Citation

Bodie, Zvi, Pensions as Retirement Income Insurance (April 1989). NBER Working Paper No. w2917. Available at SSRN: http://ssrn.com/abstract=314629

Contact Information

Zvi Bodie (Contact Author)
Boston University - Department of Finance & Economics ( email )
595 Commonwealth Avenue
Boston, MA 02215
United States
617-353-4160 (Phone)
617-353 6667 (Fax)
HOME PAGE: http://smgnet.bu.edu/mgmt/profiles/BodieZvi.html
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