At the Corner of Main and Wall Street: Family Pension Responses to Liquidity Change and Perceived Returns

40 Pages Posted: 29 Jan 2013

See all articles by Thomas Bridges

Thomas Bridges

University of Michigan at Ann Arbor - Department of Economics

Frank P. Stafford

University of Michigan at Ann Arbor - Department of Economics

Date Written: December 1, 2012

Abstract

The U.S. economy experienced a shift away from employment with coverage under a defined benefit (DB) pension plan during 1991-2009. Defined contribution (DC) plan coverage seems not to have risen much, if at all, for married men in the recent decade. Overall, the percent of the labor force covered by any pension type fell over the period 2001-2009, with most of the shift occurring in 2001-2003, as indicated by data from the Panel Study of Income Dynamics (PSID). We seek to determine the factors that lead families to lose or gain DC coverage and to put money into their private pensions or to draw money out of private pensions and annuities prior to age 65. The importance of such discretionary participation and savings responses is accentuated by both the presence of DC pensions, and, presumably, learning that such pensions can be used to stabilize finances prior to retirement. Besides the impact of the overall economic climate, individual, family level events and cash flow changes are expected to play a role in the decision to add to or withdraw from a DC pension plan. Preliminary studies suggest that the savings response by households to recent economic uncertainties during 2009-2011, was greater overall savings and an increase in liquid asset holding, a result consistent with classic predictions of a response to economic turmoil. Overall, pension fund inflows have not been a part of the increase in private saving in the Great Recession.

Suggested Citation

Bridges, Thomas and Stafford, Frank P., At the Corner of Main and Wall Street: Family Pension Responses to Liquidity Change and Perceived Returns (December 1, 2012). Michigan Retirement Research Center Research Paper No. 2012-282. Available at SSRN: https://ssrn.com/abstract=2208568 or http://dx.doi.org/10.2139/ssrn.2208568

Thomas Bridges

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

Frank P. Stafford (Contact Author)

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

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