Retirement Funds Research Articles

The COVID Retirement Boom and Personal Finance: How can we save and protect?

Granting periodic income payments to retirees, the Social Security system is undoubtedly an essential part of American retirement financing. Indeed, 90% of American retirees receive Social Security and 57% of its beneficiaries depend on it as the major source of income. While Social Security is indispensable to American retirement financing, retirees ought not to be unduly dependent on it, as current demographic changes imperil the institution’s regulation. Over the last decade, the United States retirement population increase rate has been 33.79%, approximately seven times that of the labor force population. This pattern jeopardizes the Social Security system by raising its cost disproportionately to its income. Thus, if such a demographic trend continues, the Social Security System will no longer be able to provide retirees with income. Confronting the possibility of systemic failure of the Social Security system, I will argue in this paper that retirees must take responsibility for their own finances and voluntarily produce income through investing in two asset classes – REITs and bond ladders. My research will discuss two advisable investment plans: REITs and bond ladders. Each method will be evaluated on its safety, periodicity of income, and consistency in the income quantity. Furthermore, for each method, I will examine its upsides and downsides. This research discusses the transfer of financial responsibility from the Social Security system to individual retirees. It proposes retirement plans that the members of our community can practice to produce income.

Severity reduction and private market distortion effects of voluntary and mandatory public annuity plans

AbstractMany economies have recently adopted the defined-contribution retirement financing system, but one disadvantage of this system is that retirees have to bear longevity risk. As a result, several economies have also introduced the public annuity plans. We analyze the similarities and differences between voluntary public annuity with ceiling (VPAc) plan and mandatory public annuity with flexibility (MPAf) plan that are empirically observed. Introducing either plan reduces the severity of adverse selection in public annuities, but further distorts the private annuity market. These two plans have systematically different effects on retirees’ utility levels: the good health group is adversely affected and the average health group benefits. On the other hand, the poor health group benefits from the VPAc plan but may be adversely affected under the MPAf plan.

When Aging and Climate Change Are Brought Together: Fossil Fuel Divestment and a Changing Dispositive of Security

Pension funds have become major targets for the incorporation of climate change into their investment decisions. Recently, divestment from carbon intensive companies or industries has been the object of a wave of campaigns directed at these institutional investors. This paper uses Foucault’s dispositive of security to investigate the decisions of one organization, the New York State Common Retirement Fund, which in 2021 divested from seven oil sands companies. Conceptualizing divestment within a security dispositive helps us build theory which understands divestment within existing security-oriented arrangements. It shows how changes build upon the existing dispositive, and that by looking to existing governing arrangements we can see elements that act as operators to change their direction and emphasis. In the case of pension fund divestment, risk is the operator that both sustains the investment function and also tilts the arrangement towards climate change. In these existing arrangements lay the ingredients for future social relations.

Micro-Practices of Domestic Living

Abstract This article presents case studies of older women's survival strategies in domestic settings in the expensive city of Munich, based on ethnographic material from two research projects on women's precarious retirement and the use of technology in old age. The self-care routines developed by the women over time assemble mental strategies and attitudes, bodily practices and socio-material techniques integrated into a specific spatial setting. These routines help them adapt to their physical impairments under multiply precarious circumstances: the pensioners portrayed have limited retirement funds, and thus, cannot afford household assistance or technical aids or even moving to another flat or into assisted living. Delving into private life-worlds and approaching women's perspectives and vulnerable agency, provides fresh insights into the field of private dwellings, often neglected in studies on old age.

How has ESG investing impacted investment portfolios? A case study of the Malaysian civil service pension fund

Environment, social, and governance (ESG) criteria have become important in investment and risk management in recent years. ESG-mandated investment has also been trending among investors. In Malaysia, the ESG-related index known as the FTSE4Good Bursa Malaysia (F4GBM) index was first launched in December 2014. This index prompted fund managers to use the benchmark as a measure of performance. However, there has been a lack of research on ESG-related pension funds. Hence, this study examines the impact of ESG investing on the investment portfolio of the Malaysian civil service pension fund. This pension fund is managed by the Retirement Fund Incorporated (Kumpulan Wang Persaraan Perbadanan; KWAP). Using quarterly data from 2017Q3 to 2022Q3, our results show, first, that KWAP has had a higher proportion of ESG-rated securities than of non-ESG-rated securities over the last five years. Secondly, ESG-rated stocks provide higher returns than non-rated stocks in KWAP's portfolio. Thirdly, ESG-rated securities have lower risk levels than non-ESG-rated securities. This study also found that ESG-rated securities provide a higher return per unit of risk relative to non-ESG-rated stocks. As a policy implication, ESG-rated investment has impacted the pension fund by providing higher returns and lower risk. This study contributes to the awareness of the benefits of ESG investing among state-funded pension schemes.

The Work of Retirement

AbstractIn the past few decades, caregivers, such as nursing assistants and home health aides, have come to compose the fastest-growing segment of the paid workforce in the United States. At the same time, corporate caretakers of workers’ savings, such as pension funds and mutual funds, have become the nation's largest investors, bound by fiduciary duties of trust. And unprecedented numbers of elder employees and retirees have become the biggest supposed beneficiaries of both care labor and trust capital, depending on health workers and asset managers in their daily lives. At the center of this emerging structure of work, wealth, and welfare lies the pension system, a telling crucible of class relations in our time. Several recent books across different disciplines examine the shifting politics of pensions in the United States and around the world. The spate of new studies presents an opportunity to explore the remarkable role of retirement funds in reorganizing labor and finance over the past fifty years. Rather than offering a historiographical critique of current work, this expository essay surveys the main findings of a larger and longer body of scholarship on organized labor and investment related to pensions. Though focused on the United States, it places the American story in a comparative context. The survey points to a fertile field for further study: as retirees have increasingly relied on professional asset managers and caregivers, the finance and health sectors have undergone converging crises over fiduciary duty and elder care, posing parallel challenges for organized labor.

The status of nomination forms and wills when retirement funds' death benefits are distributed

This paper discusses the importance of deceased retirement fund members nominating their preferred beneficiaries to receive their accumulated retirement benefits when they die. It assesses whether nominations made by deceased members through nomination forms (and at times wills) are binding on retirement funds boards when distributing death benefits. It further assesses whether nominated beneficiaries are entitled to be allocated the available death benefits. Most importantly, this paper highlights the inherent weakness in section 37C of the Pension Funds Act 24 of 1956 regarding the treatment of nominated beneficiaries. It demonstrates that these beneficiaries are often requested to prove financial dependency despite this provision being silent on the issue. It illustrates further that the nominated beneficiaries' entitlement to be considered and allocated death benefits does not arise from financial dependency but from the act of nomination. It argues that there is no mechanism that retirement funds' boards can utilise to determine what should be allocated to the nominated beneficiaries. Furthermore, this paper argues that section 37 of the PFA is constitutional.

The Jim Croce Question

The Jim Croce Question

PENGGUNAAN METODE PROJECTED UNIT CREDIT PADA ASURANSI PENSIUN GABUNGAN MODEL VASICEK DAN CIR

Pension plan is an investment plan offered by employee company or life insurance companies to help create retirement funds. This research attempts to estimate the normal cost that participants must pay as well as the actuarial liability that must be paid by the insurance company to the participants using Projected Unit Credit method. Projected Unit Credit method uses the present value of the pension benefit and divided it by participant’s years of service. stochastic interest such as the Vasicek model and the CIR model will be used as a comparison. The result of this research is that the estimation of the normal cost and actuarial liability with the CIR model is smaller than the Vasicek model in the initial year, but the CIR model experience a greater increase than the Vasicek model which causes the normal cost and actuarial liability with the CIR model more expensive than the Vasicek model at the end of the contract. Both premiums and the actuarial liabilities increase as participants age.

Notes: Do retirement funds have a right to transfer accrued retirement benefits without non-member spouses’ consent? An analysis of the Collatz matter

Neither the legislature nor the courts have adequately determined how to regulate benefits that retirement fund members married in community of property derive a right to claim before their death. It illustrates the failure of the courts to assess the intersection between matrimonial principles and pension rules when faced with nonmember spouses who argue that their deceased member spouses’ retirement benefits accrued to their joint estates. The courts need to consider seriously the applicability of matrimonial principles before retirement benefits can be treated as death benefits. Further, the note demonstrates that the courts over-emphasise the role of pension rules and totally disregard matrimonial principles, thereby depriving surviving non-member spouses of their share of the accrued retirement benefits. This note further argues that the legislature should urgently intervene.

Ahorro voluntario para el retiro: su beneficio fiscal

In Mexico, the percentage of people who save voluntarily for their retirement fund is very low. The general objective of this paper is to highlight the importance and fiscal benefits of voluntary savings for retirement. Thus contributing to the achievement of the Sustainable Development Goals; specifically to the end of poverty, in this case, in adulthood, promoting sustained, inclusive and sustainable economic growth, full and productive employment and decent work; as well as the reduction of inequalities, progressively achieving greater equality of income and opportunities. This research work is based on a mixed approach, with a descriptive and documentary design. It highlights the importance of voluntary savings for retirement, and its fiscal benefit; however, it does not rule out the responsibility of the Government in reforms for a better functioning of the current pension system.

Target Retirement Fund: A Variant on Target Date Funds that Uses Deferred Life Annuities Rather than Bonds to Reduce Risk as Retirement Approaches

Target Retirement Fund: A Variant on Target Date Funds that Uses Deferred Life Annuities Rather than Bonds to Reduce Risk as Retirement Approaches

IS THE KWAP DEFINED BENEFIT PENSION FUND SUSTAINABLE IN THE LONG RUN?

The Retirement Fund Incorporated (KWAP) manages the civil servant pension fund. It is a statutory body governed by the Ministry of Finance to manage Malaysia’s civil employees’ pension scheme. In order to examine the fund’s long-term sustainability, this study simulates 560 scenarios to examine the required rate of return needed to fund this defined benefit pension based on four parameters, namely contribution rate, years of service, retirement age and life expectancy. Our results show: First, the minimum years of service for pension eligibility should be increased to 20 years. Second, a contribution rate of at least 13 percent per worker to KWAP is needed. Third, there are no significant changes in the required rate of return even though the retirement age is extended from 55 to 60. Fourth, this study shows that the contribution period is more crucial than the post-retirement period for the sustainability of the pension fund. As a policy suggestion, there is a need for the authority to set a minimum funding ratio for the KWAP pension fund to ensure its long-term sustainability.

Management of Retirement Funds by Republican vs. Democrat States: Understanding the Differences

Management of Retirement Funds by Republican vs. Democrat States: Understanding the Differences

Demographic Challenges in Poland Understanding Low Fertility

Research background: The phenomenon of low fertility in Poland is a vital subject of demographic analysis. In recent years, not only have there been changes in procreative and family models, but also in the age structure of society. This is particularly significant in the context of population ageing, which is becoming increasingly evident and brings numerous challenges such as increased burden on healthcare systems, a decrease in the active workforce, and the need to secure adequate retirement funds. Despite the desire to have children, many individuals refrain from making such a decision, and the reasons for this choice are diverse. Therefore, it was essential to conduct an analysis of the factors determining fertility in Poland, considering both the economic and social aspects. Understanding how the economic situation, labour market conditions, and changes in social structure impact on the decision-making process regarding childbearing is essential. Purpose of the paper: The objective of this article was to analyse fertility rates in Poland for the period 2004-2020. The conducted research identified the factors influencing the observed state of low generational replacement and determining their intensity. Methodology/Methods/Data sources: The data used in this article were sourced from the Central Statistical Office and covered the years 2004-2020. The study was based on literature concerning demography and econometrics. Three statistical methods were applied in the analysis of fertility in Poland: the Classical Method of Least Squares (CMLS) model, the Fixed Effects (FE) estimator, and the Random Effects (RE) estimator. Fertility analysis was conducted at regional level by dividing Poland into 16 administrative units (voivodeships). A panel model was employed for the analysis, and the results were subjected to Wald, Breusch-Pagan, and Hausman tests to compare the outcomes obtained from different models. Findings: The results of the analysis indicate that the economic situation and the labour market significantly influence the decision to have children in Poland. The trend of low fertility, although showing some increase, is still characteristic of the country compared to other EU nations. The analysis of the factors determining fertility is vital for understanding the decisions of young generations of Poles regarding parenthood.

Analysis Towards the Factor of Inadequacy Retirement Fund Among EPF Members

Aging population has become a global phenomenon. Having a long life is great, but it could turn into a nightmare if not prepared properly, especially for retirement savings. In fact, majority retirees in Malaysia had relied on mandatory retirement scheme organized by Employees Provident Fund (EPF), meanwhile, the funds were estimated to deplete just within 5 years after being given to the retirees. Alternatively, the EPF had provided one of the largest and oldest retirement savings funds in the world. Nevertheless, the retirement funds are still insufficient to cover the monthly payments according to the projected life expectancy of a human being in Malaysia, until 75 years old. Thus, this research aims to examine the analysis towards the factor of inadequacy retirement fund among EPF members. Using content analysis, this research examined the appropriate factors to be considered as the addressed problem. The research found that the retirement planning, financial literacy, money management, unexpected cost of living and social norm during before retirement would be deemed as anchor factors to the highlighted issues. Thus, it is valuable if the future study can focus on those factors in investigating the issues.

Quantitative guidelines for retiring (more safely) in South Africa

In this paper we present guidelines for safe withdrawal rates from a living annuity (income drawdown accounts), periodically, to cover living expenses. In essence, a retiree is faced with the risk management problem of outliving their retirement fund (withdrawing too much) versus living below their means (withdrawing too little). The empirical evidence in the literature advocates for a ‘safe’ 4% annual withdrawal (or spending) rate. Therefore, the object of this paper is to examine withdrawal rates for retirees in the South African economy. Furthermore, we carry out a simulation study using historical data while incorporating longevity and fund management fees. Our analysis emphasises the risks associated with different withdrawal rates and asset allocations. We then give an example of how derivative instruments can increase the success rate of a retirement portfolio.

The sustainable lifestyle level: How real salary increases affect adequate retirement provision

ABSTRACT This article studies the effect of real increases in salary on required contribution rates when saving for retirement to maintain a Sustainable Lifestyle Level (SLL). We consider two strategies. The first sets conventional contribution rates, recalculating whenever an increase occurs. This requires smaller initial contribution rates, which then need to be increased later in the employee’s working life. The second strategy requires that a constant contribution rate be maintained that allows for the anticipated increases. This rate requires a substantially higher contribution rate from the start. The result is particularly important for setting appropriate default contribution rates for defined contribution retirement funds.

CHANGES IN THE PRE-RETIREMENT PLANS OF OLDER WORKERS (50-60 YEARS) IN PUBLIC UNIVERSITIES IN RIVERS STATE AMIDST THE COVID-19 PANDEMIC: IMPLICATIONS FOR HOUSEHOLDS

The Covid-19 pandemic has had devastating impact on employees retirement planning. Thus, this study assessed the changes in the pre-retirement plans of older workers in public universities in Rivers state amidst the COVID-19 pandemic and its implication on households. Simple random sampling technique was employed to draw a sample of 150 workers from two (2) government institutions in Rivers State namely: Rivers State University and Federal College of Education (Technical), Omoku. Questionnaire was the main instrument used for data collection which was validated by three experts with a reliability coefficient of 0.73. Descriptive statistics was used to analyze the data collected from the study and presented in tables and charts. Majority of the respondents (82%) indicated that Covid-19 has affected their retirement savings. A high number (40%) of the respondents indicated that the Covid-19 has changed their savings behavior and reduced their savings rates while 30% indicated that the pandemic has caused additional withdrawals. More than half of the respondents (63.6%) indicated that they plan to retire about the same time as planned while 18.2% plan to retire earlier than planned due to the pandemic. A large number (75%) indicated that they have withdrawn more money than usual from their retirement savings and 77.8% of the respondents used the withdrawals to help cover unexpected expenses. Also, 41% of the respondents indicated that building a stronger retirement funds and obtaining professional financial advice were some measures they were taking for their pre-retirement plans amidst the pandemic while 33.3% indicated spending less and saving more. The result showed a dramatic strain on the retirement planning of workers which could pose an effect on households by reducing household income and savings. Support in the form of counseling, education and flexibility should be given to workers by their employers to prepare for retirement.

양도소득세 1세대 1주택 비과세의 개선 방안

[Purpose] We study problems of the system of capital tax for one-house per one-household and propose new policy.
 [Methodology] We study literature review.
 [Findings] The advantages expected by introducing carry forward of capital gain tax for one-house per one-household are as follows. First, there is a problem that arises because the standard of high-priced housing that is exempt from tax for one household does not adequately reflect changes in housing prices. can provide stability. Second, it is possible to reduce the risk of the real value of property being paid as tax by taxing the gains on transfers measured in a nominal amount reflecting long-term inflation, and to maintain the asset value of the house to continue to secure stable retirement funds using reverse mortgage loans in the future can do. Third, it is possible to reduce the debate about vertical fairness due to the difference in the absolute amount of the benefit due to the non-taxation of transfer gains.
 [Implications] If the carry forward of capital gain tax system is introduced to the non-taxation of one house per household, the confusion and difficulties that arise in the process of interpreting and applying the tax law in practice can be resolved due to the complicated and difficult regulations of the current non-taxation of one-house per one-household.