Pension Freezes and Household Saving Over the Life Cycle

Defined benefit (DB) pension freezes in large healthy firms such as Verizon and IBM, as well as terminations of plans in the struggling steel and airline industries, highlight the fact that these traditional pensions cannot be viewed as risk-free promises from the employeeÂ’s perspective. Indeed, the current turmoil in financial markets and difficult economic outlook for many firms suggest that many more pension plans could be frozen soon. In this preliminary paper we develop an empirical dynamic programming framework to investigate household saving decisions in a model economy with freezeprone DB pensions. The model incorporates important sources of uncertainty facing households, including asset returns, employment, income, and mortality, as well as pension freezes. Applying a compensating variation measure of welfare, we find that pension freezes reduce welfare by a maximum of about $6,000 for individuals with a high school degree and about$2,000 for individuals with a college degree. We close by highlighting a few important issues that are missing from our preliminary analysis, including a labor supply decision and the effects of market-clearing conditions in the labor market. We hope to address these issues in future work.

Does Health Affect Portfolio Choice?

Previous studies find a strong and positive empirical connection between health status and the share of risky assets held in household portfolios. But is this relationship truly causal, in the sense that households respond to changes in health by altering their portfolio allocation, or does it simply reflect unobserved differences across households? We find that the link between health and risky assets depends crucially on the econometric treatment of unobserved heterogeneity. Once we account adequately for unobserved household differences, we find no statistically significant effect of health status on either portfolio allocations or ownership among older households (those with respondents 70 and older) in the Health and Retirement Study. Younger households, in contrast, do seem to adjust their portfolios on both the extensive and intensive margins in response to health shocks.Household portfolios, Health, Risk

Why Do Firms Offer Risky Defined Benefit Pension Plans?

Even risky pension sponsors could offer essentially riskless pension promises by contributing a sufficient level of resources to their pension trust funds and by investing those resources in fixed-income securities designed to deliver their payoffs just as pension obligations are coming due. However, almost no firm has chosen to fund its plan in this manner. We study the optimal funding choice for plan sponsors by developing a simple model of pension financing in which the total compensation offered to workers must clear the labor market. We find that if workers understand the implications of pension risk, they will demand greater compensation for riskier pension promises than for safer ones, all else equal. Indeed, in our model, pension sponsors maximize their value by making their pension promises free of risk. We close by positing some explanations for why no real-world firm follows the prescription of our model.

The Trajectory of Wealth in Retirement

In this paper, we develop a measure of household resources that converts total financial, nonfinancial, and annuitized assets into an expected annual amount of wealth per person in retirement. We use this measure, which we call "annualized comprehensive wealth," to investigate spend-down behavior among a panel of older households in the Health and Retirement Study (HRS) from 1998 to 2006. Our analysis indicates that for most retired households, comprehensive wealth balances decline much more slowly than their remaining life expectancies, so that the predominate trend is for real annualized wealth actually to rise significantly with age over the course of retirement. Comparing the estimated age profiles for annualized wealth with profiles simulated from several different life cycle models, we find that a model that takes into account uncertain longevity, random medical expenses, and intended bequests lines up best with the broad patterns of rising annualized wealth in the HRS.Retirement wealth, life-cycle saving, mortality risk, precautionary saving, bequests, risk and uncertainty.

Why Do Firms Offer Risky Defined Benefit Pension Plans?

Even risky pension sponsors could offer essentially riskless pension promises by contributing a sufficient level of resources to their pension trust funds and by investing those resources in fixed-income securities designed to deliver their payoffs just as pension obligations are coming due. However, almost no firm has chosen to fund its plan in this manner. We study the optimal funding choice for plan sponsors by developing a simple model of pension financing in which the total compensation offered to workers must clear the labor market. We find that if workers understand the implications of pension risk, they will demand greater compensation for riskier pension promises than for safer ones, all else equal. Indeed, in our model, pension sponsors maximize their value by making their pension promises free of risk. We close by positing some explanations for why no real-world firm follows the prescription of our model.

Session 4: Evolutionary Indeterminism

Proceedings of the Pittsburgh Workshop in History and Philosophy of Biology, Center for Philosophy of Science, University of Pittsburgh, March 23-24 2001 Session 4: Evolutionary Indeterminis

A New Look at the Wealth Adequacy of Older U.S. Households

We examine the current wealth adequacy of older U.S. households using the 1998-2006 waves of the Health and Retirement Study (HRS). We find that the median older U.S. household is reasonably well situated, with a ratio of comprehensive net wealth to present value poverty- line wealth of about 3.9 in 2006. About 18 percent of households, however, have less wealth than would be needed to generate 150 percent of poverty-line income over their expected future lifetimes. We see similar patterns of wealth adequacy when we examine ratios of annualized comprehensive wealth to pre-retirement earnings. Comparing the leading edge of the baby boomers in 2006 to households of the same age in 1998, we find that the baby boomers show slightly less wealth, in real terms, than their elders did, but still have appear to have adequate resources at the median. Moreover, we find a rising age profile of annualized wealth, even within households over time and after controlling for other factors, suggesting that older households are not spending their wealth as quickly as their survival probabilities are falling.

Recent experiences using finite-element-based structural optimization

Structural optimization has been available to the structural analysis community as a tool for many years. The popular use of displacement method finite-element techniques to analyze linearly elastic structures has resulted in an ability to calculate the weight and constraint gradients inexpensively for numerical optimization of structures. Here, recent experiences in the investigation and use of structural optimization are discussed. In particular, experience with the commercially available ADS/NASOPT code is addressed. An overview of the ADS/NASOPT procedure and how it was implemented is given. Two example problems are also discussed

Preserving Endangered Archives in Jerba, Tunisia: The al-Bāsī Family Library Pilot Project

In July 2017, we launched a project entitled “Preserving Endangered Archives in Jerba, Tunisia: The al- Bāsī Family Library Pilot Project.”1 Generously supported by the Endangered Archives Programme (EAP) funded by the British Library and Arcadia, the project aims at the digital preservation of the private Arabic manuscript library of the al- Bāsī family in the town of Houmet Souk on the island of Jerba in southern Tunisia. This report offers a brief history of the collection and its contents as well as a description of the project’s training efforts and aims

Ŷarba y los límites del poder rustamí. La comunidad ibāḍí de Ŷarba bajo los imāmes rustamíes de Tāhert (779-909 d.C.)

This article is aimed at analyzing the medieval and modern source material dealing with the history of Djerba under the Rustamid Imāmate in an attempt to clarify the nature of both the historical and historiographical relationship between them. It will begin by discussing the available primary and secondary source material, including the historiographical challenges they present. An analysis of the textual and archeological evidence connecting the Rustamids and Djerba will follow. Next, it will attempt to synthesize the scattered bits of evidence available in the historical record in an effort to present a clearer picture of Djerba in the Rustamid period. On the basis of this textual and archeological evidence, it will be argued that Djerba was home to an ibādī community independent of the government in Tahert for the majority ‒if not all‒ of that Imāmate’s existence ‒distinguishing the island from the surrounding areas of the Djerid (in southern Tunisia), parts of Aghlabid Ifrīqiya and the Jebel Nafūsa. Furthermore, it will be shown that evidence suggests this independence was not only a political, but also a religious one.Este ensayo analiza las fuentes de origen medieval y moderno sobre la historia de Ŷarba en el Imāmato rustamí en un intento de aclarar la naturaleza de la relación histórica e historiográfica entre ellos. Se empieza por discutir las fuentes primarias y secundarias disponibles, incluyendo los retos historiográficos que plantean y se presenta a continuación un análisis de las evidencias textuales y arqueológicas que conectan a los rustamíes con Ŷarba. Se intenta después sintetizar las piezas dispersas de la evidencia disponible en el registro histórico con el fin de presentar una imagen más clara de Ŷarba durante el período rustamí. Con base en esta evidencia textual y arqueológica, se argumentará que Ŷarba era hogar de una comunidad ibādí independiente del gobierno en Tāhert durante la mayor parte (si no en su totalidad) de la existencia del Imāmato, distinguiendo así la isla de los alrededores del Ŷarid (en el sur de Túnez), partes de la Ifrīqiya Aglabí y el Ŷabal Nafūsa. Se muestra por último que la evidencia sugiere que esta independencia no era solamente política, sino religiosa