Innovations in Retirement Financing

This book outlines key problems involved in reducing financial risks in retirement, and then it goes on to propose fresh solutions. These include cash-balance pension plans that combine features of traditional defined benefit pensions and increasingly popular defined contribution plans. Other novel approaches discussed include reverse-annuity mortgages, which permit people to benefit from the value of their homes without actually selling them, various forms of annuities, and long-term care insurance. A framework chapter sets the stage by examining what retirement planning can be expected to accomplish and how planning reduces risks by hedging, insuring, and diversifying. This book should be required reading for all who seek to strengthen retirement decision-making and old age protection.

Contents

Preface

Pt. I Sources of Financial Retirement Risk

1 Analyzing and Managing Retirement Risks 3
2 Income Shocks, Asset Returns, and Portfolio Choice 20
3 Worklife Determinants of Retirement Income: Differences Across Men and Women 50

Pt. II Developments in Retirement Planning Models

4 An Economic Approach to Setting Retirement Saving Goals 77
5 Retirement Planning and the Asset/Salary Ratio 106
6 Outcomes-Based Investing with Efficient Monte Carlo Simulation 132

Pt. III Innovations for Managing Retirement Wealth

7 Taking the Subsidy Out of Early Retirement: Converting to Hybrid Pensions 149
8 Mortality Risk, Inflation Risk, and Annuity Products 175
9 Integrating Life Annuities and Long-Term Care Insurance: Theory, Evidence, Practice, and Policy 198
10 Survivor Bonds and Compulsory Annuitization: Reducing the Cost of Pension Provision 222
11 Turning Assets into Cash: Problems and Prospects in the Reverse Mortgage Market 234
12 Aging and Housing Equity 254
13 Risk Management Through International Diversification: The Case of Latin American Pension Funds 282

Contributors 313
Index 319