Retirement Assets Research Articles

Should the Government Be Paying Investment Fees on $3 Trillion of Tax-Deferred Retirement Assets?

Abstract Under standard assumptions, individuals and the government are indifferent between traditional tax-deferred retirement accounts and “front-loaded” (Roth) accounts. Adding investment fees to this benchmark, individuals are still indifferent, but the government is not. We show that under weak conditions firms charge equal percent fees under both systems, yielding higher dollar fees under Traditional. We estimate that tax deferral increases demand for asset management services by $3.8 trillion, costing the government $23.4 billion in annual fees. In a general equilibrium differentiated-product model, tax deferral produces a larger asset management industry, higher taxes, and lower social welfare. (JEL G11, G23, G28, G51, H21, J32)

Preparing Auditors to Evaluate Blockchains Used to Track Tangible Assets

SUMMARY This article summarizes “Tracking Tangible Asset Ownership and Provenance with Blockchain” (Sheldon 2022), which introduces auditors to the risks of using blockchain’s shared repository to track assets in the physical world. The underlying challenge is keeping the status of tangible assets aligned with their digital representations on a blockchain. In response, the summary focuses on the parties, technologies, and processes that make this task complex. The summary begins with an overview of how blockchain can be used to track tangible assets, then discusses four stages of tracking tangible assets with blockchain: (1) design and governance of a blockchain, (2) asset creation, (3) asset transfer, and (4) asset retirement. Based on the risks highlighted in these four stages, the summary presents a framework of risk considerations and control objectives that auditors can use to evaluate the extent to which a blockchain serves as a reliable repository for tracking tangible assets.

Planning natural gas supply chain pathways for energy system decarbonisation: An Australian case study

The future role of natural gas systems in a deeply decarbonised world is very uncertain. This work seeks to characterise the changes that the clean energy transition is likely to induce in the natural gas chain, across extraction and transmission, distribution networks and gas consumption/use trends, for various scenarios with different demand and supply drivers. First, the results of a least-cost macro-scale energy system planning optimisation are explored to identify future natural gas demand and supply requirements. Second, those findings are used as inputs to a detailed analysis of the full gas supply chain, from extraction to final use, to examine the evolution of i) stored resource levels; ii) transmission and distribution networks operation and financing; and iii) required capacity and siting of gas generation; all, with a realistic account of the related infrastructure. Australia is investigated as a case study that relies on natural gas for both domestic and export purposes. Results project a shift towards a more localised gas consumption to be largely supplied by fewer basins, with associated potential transmission and extraction bottlenecks. They anticipate an overall less utilised, ageing distribution network with potential challenges to asset reliability and financing. Finally, they demonstrate both the scheduled and early retirement of fossil generation assets can allow the siting of considerable amounts of new gas power firming capacity on brownfield sites, thus offering an opportunity to reduce total system costs.

Inertia of Technology Stocks: A Technology-Explicit Model for the Transition toward a Low-Carbon Global Aluminum Cycle.

Low-carbon technologies are essential for the aluminum industry to meet its climate targets despite increasing demand. However, the penetration of these technologies is often delayed due to the long lifetimes of the industrial assets currently in use. Existing models and scenarios for the aluminum sector omit this inertia and therefore potentially overestimate the realistic mitigation potential. Here, we introduce a technology-explicit dynamic material flow model for the global primary (smelters) and secondary (melting furnaces) aluminum production capacities. In business-as-usual scenarios, we project emissions from smelters and melting furnaces to rise from 710 Mt CO2-eq./a in 2020 to 920-1400 Mt CO2-eq./a in 2050. Rapid implementation of inert anodes in smelters can reduce emissions by 14% by 2050. However, a limitation of emissions compatible with a 2 °C scenario requires combined action: (1) an improvement of collection and recycling systems to absorb all the available postconsumer scrap, (2) a fast and wide deployment of low-carbon technologies, and (3) a rapid transition to low-carbon electricity sources. These measures need to be implemented even faster in scenarios with a stronger increase in aluminum demand. Lock-in effects are likely: building new capacity using conventional technologies will compromise climate mitigation efforts and would require premature retirement of industrial assets.

An Exploration of Investment Strategies within Zambia's National Pension Scheme Authority

As a critical state-owned enterprise administering billions in retirement assets, NAPSA's investment governance has substantial fiscal and welfare implications for Zambia. Investment strategies in government institutions involve a systematic and comprehensive approach to managing public funds for various purposes, such as infrastructure development, pension fund assets, and bond proceeds. However, there has been little scholarly investigation into the real- world dynamics, drivers, and performance impacts of NAPSA's investment strategies, policy decisions over its recent history. This study aimed to bridge that knowledge gap through qualitative analysis of NAPSA's investment strategy formulation, risk management approaches, implementation processes, and financial results over the past two decades. The primary instruments for data collection in this study were semi-structured interviews and focus groups, both conducted remotely via Microsoft Teams. The data analysis for this study was undertaken using thematic analysis. This approach was instrumental in interpreting the data collected from the interviews and focus groups. Furthermore, qualitative documents like reports provided corroborating context. Together these primary data resources facilitated nuanced analysis around the multi-layered drivers and impacts influencing NAPSA’s investment governance – aligning techniques tightly with exploratory research goals seeking elucidations to inform potential policy enhancements. The findings revealed that NAPSA maintained a diversified investment portfolio across various asset classes. Formalization of developmental impact assessment measures and the strengthening of specialized analytical competencies are amongst the recommendations. These steps are important for NAPSA to continue effectively managing its substantial assets in a manner that supports both the welfare of its pensioners and the broader economic interests of Zambia.

A Dynamic Analysis of the Impact of Household Portfolio Allocation Decisions on the Demand for Life Insurance

Prior research on the demand for life insurance in household portfolio holdings has not made a clear distinction between portfolio shifts resulting from active allocation decisions and those resulting from passive acceptance. Our study examines the relationship between household portfolio allocation decisions and the demand for life insurance in a dynamic setting, using panel data before and after the 2008 financial crisis. The study provides the first evidence that household decisions to invest in cash and cash equivalents, bonds, retirement assets, and pay off debts significantly affect life insurance ownership.

EFFECTS OF COVID-19 PANDEMIC ON OLDER WORKERS’ LABOR MARKET AND RETIREMENT DECISIONS

Abstract Several studies have documented the increase in retirement since the onset of the Covid-19 pandemic. I contribute to this literature by answering two key questions that show the pandemic excess retirement is caused primarily by demand-side factors: first, using the monthly Current Population Survey (CPS) data on employment and retirement of older workers and CPS’s panel structure, I explore if older workers left their jobs and the labor force voluntarily as a part of “the great resignation”. I find that very few workers quit their jobs voluntarily, and most retirements were preceded by involuntary job loss and unemployment. Second, using the Health and Retirement Study (HRS) with its rich data on wealth, employment, and the special Covid-19 related questions included in 2020 HRS (Wave 15), I examine if older workers who experienced job loss during the pandemic retired because they were financially prepared for retirement. I find that among the small group of older workers who quit their jobs because of the pandemic, the majority did not have adequate retirement assets and their decision is more likely to be based on their health status and vulnerability during the pandemic.

Worldwide oil and gas asset retirement obligations circa 2021

Public oil and gas companies are required to report the present value of their decommissioning liability, referred to as asset retirement obligations and provisions, for all their upstream oil and gas assets worldwide where there is a legal obligation to perform. Using publicly reported accounting data on asset retirement obligations and provisions from a sample of integrated and independent oil and gas companies, we estimate the present value of worldwide oil and gas decommissioning liability between $311 and $362 billion circa 2021, about evenly split between onshore and offshore requirements. Two unit cost metrics normalize asset retirement obligations by production and well count and are used to compare retirement commitments by company group and geographic specialization. Normalized asset retirement production cost is extrapolated to obtain a global estimate of decommissioning exposure.

Retirement Assets and the Wealth Gaps for Black and Hispanic Households

Retirement Assets and the Wealth Gaps for Black and Hispanic Households

Tracking Tangible Asset Ownership and Provenance with Blockchain

ABSTRACTBlockchain transactions are recorded in a shared and append-only repository that multiple parties verify, validate, and agree upon. While initially used to keep track of digital assets, blockchains now track the ownership and provenance of tangible assets. An inherent challenge in using blockchain for this task involves keeping the status of a tangible asset in the physical world in sync with its non-fungible token on a blockchain. While several blockchains are already being used in this manner, specific implementation details are fragmented. In response, this study examines four stages of tracking tangible assets using a consortium's permissioned blockchain, including: design and governance of a blockchain, asset creation, asset transfer, and asset retirement. Based on this analysis, this study proposes a framework of risk considerations and control objectives to evaluate the extent to which a unique blockchain serves as a reliable transaction repository for tracking the ownership and provenance of tangible assets.

Guest Editorial: Aging US Shale Wells: Years of Remaining Opportunities or Growing Asset Retirement Obligations?

A year ago, I wrote a JPT Guest Editorial on stripper wells in the US. It was the result of data analysis that I personally found shocking and the result of frustration I was having with clients looking for acquisitions at that time. The piece was written right before oil prices started an incredible climb and when natural gas prices had been under $3.00/Mcf for an extended period. On the acquisition and divestiture front, although corporate consolidation was ongoing, deal counts were at a decade low, and it was extremely hard to transact. With oil prices at $45/bbl and the so-called “shale bust” of the past few years, many investors would not even consider an unconventional asset. Given this backdrop, I had clients on the hunt for conventional assets with stable base cash flow and limited risk. One client was a very serious buyer; however, some decision makers were adamant about certain asset characteristics, namely conventional, onshore US, certain states, operated working interest, proved producing (PDP), and no stripper wells. Despite this seeming like a reasonable set of criteria, asset after asset kept getting screened out. Finally, I had a call with the CFO and in frustration told him, “They’re all stripper wells.” Something about saying that out loud stuck in my head and got me thinking. I started wondering “how many stripper wells are there?” I began to think about the well count across the US, well IPs (initial production or starting flow rates), and the approximate rates at which I generally saw most wells go uneconomic in financial modeling. Given about 1 million active wells in the US, it seemed like there ought to be a decent percentage of active, producing, conventional wells over the 20–30 BOPD mark. I started pulling well data and found that for many US regions, 95% or more of the active vertical wells were producing 15 BOPD or less. The article generated a lot of interest as it brought to light something many people think is a problem in the back of their mind but had not seen quantified in a simple way. The follow-up question I got over and over was “What about horizontal wells?” The US Energy Information Administration (EIA) estimates that about 80% of US oil and gas wells are producing less than 15 BOEPD. For horizontal wells, EIA estimates about half are 50 BOEPD or less (the use of 6:1 BOE tends to improve the overall daily rate in an amount that is disproportionate to the value and economic impact of adding the gas stream). This rate includes both conventional and unconventional wells. It is natural to assume that the older conventional wells bring down the average and that more recent production from the hottest US shale plays is much higher.

РИСКИ ЭКСПЛУАТАЦИИ НЕФТЕГАЗОВОГО ОБОРУДОВАНИЯ С ИСТЕКШИМ НОРМАТИВНЫМ СРОКОМ СЛУЖБЫ

A large number of oil and gas facilities and equipment parts around the world are approaching or have exceeded their original design life. Misuse of oil and gas equipment can easily lead to accidents, production failures or supply disruptions. This not only poses an immediate risk, but can also lead to wider economic losses as well as damage to the environment and human lives. While routine inspection can reduce some risks, it cannot identify all potential hazards. With obsolete equipment, possible safety problems cannot be predicted in advance. Taken together, all these factors can pose a potential threat to the safety of oil and gas complexes. When assessing the state of industrial safety, not only quantitative indicators of hazards must be taken into account, but also factors that can significantly increase the number of accidents and the severity of their consequences. These factors include the factor of almost constant retirement of main production assets due to depreciation and obsolescence of equipment. Having analyzed the main causes of accidents and incidents that occurred between 2016 and 2020, it was found that the cumulative share of accidents related to the operation of equipment with an expired standard service life was 64 %. The purpose of this article is to discuss guidelines for assessing life extension to ensure the technical and operational integrity of oil and gas equipment. Some threats to integrity from physical degradation mechanisms are considered. The aim is to highlight those mechanisms by which an installation deteriorates physically and functionally, including human factors and organizational problems. To make suggestions and recommendations for extending the service life without deteriorating the safe operation of the hazardous production facility.

Managing and Disclosing Environmental Risks: A Tale of Two Utilities

ABSTRACTThis case introduces students to the topic of contingent liabilities by examining the actual management decisions of two energy companies facing increased regulatory scrutiny over the environmental risks associated with coal ash. The case learning objectives include (1) researching and summarizing the guidance governing the recognition and disclosure of contingent liabilities; (2) critically assessing a company's decisions regarding the recognition and disclosure of environmental liabilities; (3) accounting for asset retirement obligations; and (4) articulating the ethical implications of a company's management and disclosure of environmental risks from the perspectives of various stakeholders. The case is designed for use in an intermediate accounting course at the undergraduate level. Students reported improvement in their knowledge and comprehension of contingent liabilities and their appreciation for the ethical implications of accounting decisions. Students also noted that they enjoyed discussing these issues in the context of real companies facing complex environmental challenges.

Tips for Marketing Gifts of Retirement Assets

Tips for Marketing Gifts of Retirement Assets

Phasing out the blast furnace to meet global climate targets

Phasing out the blast furnace to meet global climate targets

Behavioral Impediments to Valuing Annuities: Complexity and Choice Bracketing

Abstract This paper examines two behavioral factors that diminish people's ability to value a lifetime income stream or annuity, drawing on a randomized experiment with about 4,000 adults in a U.S. nationally representative sample. We find that increasing the complexity of the annuity choice reduces respondents' ability to value the annuity, measured by the difference between the sell and buy values they assign to the annuity. When we limit narrow choice bracketing by inducing people to think first about how quickly or slowly to spend down assets in retirement, their ability to value an annuity increases.

Preferences for deferred annuities in the Japanese retirement market

PurposeDeferred annuities, which offer longevity insurance with relatively low premiums, are a potential payout option in defined contribution (DC) pension plans in Japan. This study aims to measure individual preferences for these annuities.Design/methodology/approachThis study conducts stated choice experiments using an original internet survey. This methodology provides a decision-making scenario similar to that faced by individuals when making real retirement saving decisions. Subjective valuations of deferred, immediate and term annuities are compared.FindingsThis study finds that male individuals have an insignificant preference for deferred annuities – the benefits of which begin at an advanced age. On average, deferred annuities are considered a gamble, betting against life and individuals who are married and have higher financial assets tend to value them less.Originality/valueWhile previous studies, based on theory and simulations, have found that deferred annuities should be included in individual retirement assets, this study examines annuity preferences from the demand side (i.e. DC plan participants) –an approach that has not been addressed in the literature.

The Need to Adopt Preventative Measures to Combat the Misappropriation of Retirement Fund Assets

This paper discusses the challenge of the misappropriation of retirement fund assets by trustees, fund asset managers and retirement funds’ administrators. It demonstrates that retirement fund members lose substantial retirement benefits due to the illegal and unlawful conduct of those who manage and administer retirement funds. It evaluates whether the South African legislative framework offers retirement funds and their members adequate protection from activities that may compromise the delivery of the pension promise such as: mismanagement; fraudulent activities; gross negligence; and the outright looting of retirement fund assets. In particular, this paper illustrates that the law in South Africa does not deter would-be wrongdoers from acting in a manner that may compromise the benefits expected by retirement fund members when they exit their funds. It advocates the adoption of adequate preventative legislative measures that would make it difficult for anyone to act in a manner that would compromise retirement fund members' benefits in South Africa.

ACCOUNTING RECOGNITION OF ASSET ABANDONMENT AND SITE RESTORATION

<p><em>This research will discuss the recognition of asset abandonment and site restoration or commonly known as ARO (Asset Retirement Obligation) in oil and gas company. The purpose is to be able to provide an overview that can be used by companies in calculating ARO that must be paid at the end of the contract period. The formulation of the problem is which method is used to determining the amount of asset abandonment and site restoration or ARO that is appropriate to overcome the potential problems that arise at the end of the contract period. This research is carried out by using a mixed method in analyzing the findings, so it will find the in-depth findings which will be useful to assist the company's management in making decisions. Signal theory is a theory that will be chosen in this research. This research will use three stages of analysis, such as descriptive analysis, content analysis, and constant comparative analysis. Based on the results it might found that the recognition of asset abandonment and site restoration carried out according to regulations apply. While company uses the method of calculating liabilities based on future values that is continually calculate in present value.</em></p><p><em> </em></p><p><strong><em>Keywords:</em></strong><em> Contingent liabilities, provisions, liability for asset abandonment and site restoration</em></p>

Retirees in Profile: Evaluating Five Distinct Lifestyles in Retirement

Retirees in Profile: Evaluating Five Distinct Lifestyles in Retirement