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Title:Optimal savings for retirement: The role of individual accounts and disaster expectations PDF Logo
Authors:Le Blanc, Julia
Scholl, Almuth
Issue Date:2011
Series/Report no.:Discussion Paper Series 1: Economic Studies 2011,33
Abstract:We employ a life-cycle model with income risk to analyze how tax-deferred individual accounts affect households' savings for retirement. We consider voluntary accounts as opposed to mandatory accounts with minimum contribution rates. We contrast add-on accounts with carve-out accounts that partly replace social security contributions. Quantitative results suggest that making add-on accounts mandatory has adverse welfare effects across income groups. Carve-out accounts generate welfare gains for high and middle income earners but welfare losses for low income earners. In the presence of rare stock market disasters, individual accounts with default portfolio allocation crowd out direct stockholding and substantially reduce welfare.
Subjects:individual retirement accounts
household portfolio choice
consumption and saving over the life-cycle
JEL:E21
H55
G11
ISBN:978-3-86558-775-6
Document Type:Working Paper
Appears in Collections:Discussion Paper Series 1: Economic Studies, Deutsche Bundesbank

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