The effect of market returns and volatility on investment choices in Chile’s defined contribution retirement plan

2021 ◽  
Vol 112 ◽  
pp. 102321
Author(s):  
Werner D. Kristjanpoller ◽  
Josephine E. Olson
Keyword(s):  
Defined Contribution ◽  
Market Returns ◽  
Retirement Plan ◽  
Investment Choices

scholarly journals Simplifying choices in defined contribution retirement plan design: a case study

2017 ◽  
Vol 17 (3) ◽  
pp. 363-384 ◽  
Author(s):  
DONALD B. KEIM ◽  
OLIVIA S. MITCHELL
Keyword(s):  
Risk Factors ◽  
Administrative Data ◽  
Pension Fund ◽  
Large Firm ◽  
Defined Contribution ◽  
Turnover Rates ◽  
Retirement Plan ◽  
Systematic Risk Factors ◽  
Investment Choices

AbstractThe growth and popularity of defined contribution pensions, along with the government's increasing attention to retirement plan costs and investment choices provided, make it important to understand how people select their retirement plan investments. This paper shows how employees in a large firm altered their fund allocations when the employer streamlined its pension fund menu and deleted nearly half of the offered funds. Using administrative data, we examine the changes in plan participant investment choices that resulted from the streamlining and how these changes might affect participants’ eventual retirement wellbeing. We show that streamlined participants’ new allocations exhibited significantly lower within-fund turnover rates and expense ratios, and we estimate this could lead to aggregate savings for these participants over a 20-year period of $20.2 M, or in excess of $9,400 per participant. Moreover, after the reform, streamlined participants’ portfolios held significantly less equity and exhibited significantly lower risks by way of reduced exposures to most systematic risk factors, compared with their non-streamlined counterparts.

Selecting Mutual Funds for Retirement Accounts (A)

2018 ◽  
pp. 1-17
Author(s):  
Phillip A. Braun
Keyword(s):  
Mutual Funds ◽  
Mutual Fund ◽  
First Year ◽  
Retirement Savings ◽  
Defined Contribution ◽  
Management Turnover ◽  
Risk Return ◽  
Retirement Plan ◽  
Retirement Accounts ◽  
Northwestern University

Alice Monroe, a 30-year-old married mother of two, was an admissions officer at the Kellogg School of Management at Northwestern University. She was just completing her first year of service at Northwestern and qualified for the university's 403(b) retirement plan. It was early October 2017, and she had until the end of the month to decide if and to what extent she would participate in Northwestern's retirement plan–that is, how much of her salary should she put into the retirement plan, and into which mutual fund or funds should she allocate her savings? The case includes background on defined contribution and benefit plans as well as mutual funds. It goes into detail about Northwestern's retirement plan, including data on the performance of 15 of the plan's core mutual funds. The case also provides each fund's strategy, Morningstar Rating and Morningstar Category, expense ratio, assets under management, turnover rate, and historical performance for the last 10 years. Using modern portfolio theory (diversification and risk-return trade-off) and with an understanding of mutual fund fees and the tax advantages of retirement savings, students will decide how much Alice should invest and in which mutual funds.

Individual Biases in Retirement Planning and Wealth Management

2017 ◽  
Author(s):  
James E. Brewer ◽  
Charles H. Self
Keyword(s):  
Retirement Planning ◽  
Developed Countries ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Market Returns ◽  
Wealth Transfer ◽  
Investor Returns ◽  
Certified Financial Planner ◽  
And Behavior ◽  
Defined Benefit Pensions

Around the globe, the gradual move from defined benefit pensions to defined contribution pensions has increased the need for individual retirement planning. Examples of this include U.S. savings rates at historic lows, poor retirement prospects for citizens in developed countries, and the disparaging gap between investor returns and market returns. Research indicates that individuals working with a financial advisor generally receive better results than those who do not. Working with a Certified Financial Planner (CFP) gives an added level of security because a CFP takes an oath to keep the client’s interests ahead of his or her own. This chapter puts describes giving nudges to help individuals close the savings, investing, and behavior gaps that will improve their total wealth and wealth-transfer picture.

Retirement concerns and financial literacy in Brunei

2020 ◽  
Vol 40 (3/4) ◽  
pp. 342-365
Author(s):  
Pg Md Hasnol Alwee Pg Hj Md Salleh ◽  
Roslee Baha
Keyword(s):  
Financial Literacy ◽  
Home Ownership ◽  
Pension Reform ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Content Type ◽  
Financial Advice ◽  
Knowing How ◽  
Retirement Plan

PurposeDespite the inclusion of financial literacy in retirement studies, there are limited studies that look into retirement concerns and how financial literacy plays a role in managing retirement concerns. Understanding retirement concerns prior to retirement is important given how it affects retirement satisfaction. Therefore, this paper aims at assessing the retirement concerns in Brunei and the role of financial literacy in managing those concerns.Design/methodology/approach700 government employees, divided into three groups, were interviewed: Defined Contribution Plan (DCP) employees retiring in the next 10–15 years, DCP employees retiring in 20–30 years' time and Defined Benefit Plan (DBP) employees retiring in the next 10 years. Pearson's chi-square tests and logistic regressions were used to ascertain significant relationships.FindingsThe results indicate the relatively younger DCP group is more likely to be financially literate compared to senior groups however, these respondents are more inclined to focus on private home ownership at this juncture. The findings also indicate the importance of knowing how much to save for retirement towards determining those with an additional retirement plan, and consequently reducing their retirement concerns. The value of financial advice is also significant in determining the amount to save for retirement and in possessing an additional retirement plan.Research limitations/implicationsResults cannot be generalised to the population, as purposive sampling was utilised due to the absence of a population frame.Practical implicationsThe implications of the paper may provide value to policymakers to consider approaches to enhance the quality of financial advice and provide sound knowledge in computing the amount needed for retirement. Understanding the role of financial literacy vis-à-vis retirement concerns may also be useful for neighbouring countries with similar socio-cultural aspects such as Malaysia.Originality/valueGiven the limited research on retirement concerns and financial literacy, this paper is one of the few to emphasise on the importance of knowing how much is needed to save for retirement, in relation to retirement concerns. This may also be useful in other countries/communities with similar retirement context such as those with relatively low retirement planning or with similar retirement schemes. Further, with the 1993 pension reform, there is no known publication on retirement concerns and expectations in Brunei. Left unchecked, it may lead to poverty in old age and/or dependency on welfare institutions and family support.

scholarly journals Use of Advisors and Retirement Plan Performance

2020 ◽  
Vol 31 (2) ◽  
pp. 342-356
Author(s):  
Rui Yao ◽  
Weipeng Wu ◽  
Cody Mendenhall
Keyword(s):  
Portfolio Allocation ◽  
Objective Measures ◽  
Retirement Savings ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Retirement Plans ◽  
Cross Sectional ◽  
Retirement Plan ◽  
Research Gap

As defined contribution (DC) plans become more popular than defined benefit (DB) plans, American workers are increasingly responsible for their retirement savings. Because retirement plan participants' portfolio allocation is constrained by the available funds in the plan, the construction of a plan's investment menu has become extremely important. No research has evaluated fund selection in retirement plans or compared plans involving an advisor with self-directed plans. To fill this research gap, this study employs cross-sectional, nationwide data that include 5,570 retirement plans with 100 or more participants in 2013, 2014 and 2015. Results show that in most cases, using advisors is not related to plan performance. Plan sponsors should require advisors to periodically evaluate the performance of plans under their management using objective measures.

Financial Advice, Plan Choice, and Retirement Plan Satisfaction

2020 ◽  
pp. JFCP-18-00050
Author(s):  
Michael P. Ryan ◽  
Brenda J. Cude
Keyword(s):  
Risk Tolerance ◽  
Defined Benefit ◽  
Defined Contribution ◽  
Retirement Plans ◽  
Retirement Plan ◽  
Defined Contribution Plans ◽  
Plan Choice ◽  
Public Sector Employees ◽  
Selection Of

Most private sector employees have access to defined contribution retirement plans while public sector employees often may choose defined benefit or defined contribution plans. This research utilized a survey of faculty to analyze retirement plan satisfaction. Advice from a financial planner was positively associated with satisfaction with portability. Retirement plan knowledge was negatively associated with satisfaction on the decision period. Selection of a defined benefit plan was positively related to four aspects of satisfaction and negatively related to regret. Financial planners assisting individuals who face such choices should acknowledge the decision's challenges and evaluate the client's level of retirement planning knowledge. Focusing on long-term goals and the client's investment and mobility risk tolerance may be helpful, especially after market corrections.

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