Making Economic Decisions about Retirement Plans

Making Economic Decisions
Making Economic Decisions

Making Economic Decisions about Retirement Plans

Assessing How the Market affects Economic Decisions about Retirement Plans

A number of aspects have emerged in the last ten years regarding the behaviors of employee in making retirement decisions. This dissertation investigates various insights from previous studies about how employees make investment, saving and manage their retirement plans. The purpose of this study understands the behavior adopted by the individuals while making economic decisions and the reaction of the market towards these decisions.

This study aims at assessing behavior adopted by the individuals while making economic decisions and the reaction of the market towards these decisions. Quantitative analysis was used to assess the correlation between dependent as well as independent variables (Christensen, Diebold and Rudebusch, 2011). Understanding behavior adopted by the individuals while making economic decisions is vital when it comes to addressing the research questions of this study.

This study uses empirical approach to report on the findings of different simulation tests performed on the Model Plan in the Model Economy (Diebold, Rudebusch & Aruoba 2006). The Model economy and Model plan are considerably streamlined; nevertheless, they demonstrate the actual behavior adopted by the individuals while making economic decisions. To assess behavior adopted by the individuals while making economic decisions simple model of pension plans is created (Diebold, Rudebusch & Aruoba, 2006).

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The purpose of this study is to assess individual behaviors while making economic decisions and the reaction of the market towards these decisions. The study also highlights on the how workers make decisions to save, manage the retirement investments and how they address their assets in retirement. The study used quantitative technique to assess the gathered information (Perlin, 2007).

Different behavior adopted by the individuals while making economic decisions can be estimated by data. Information associated with behavior adopted by the individuals while making economic decisions can provide a detailed understanding regarding how DC plans are implemented by various nations; decisions workers make about their retirement plans; and if employees are well placed and informed about the plans offered by the employers or the governments

Much as plan-level information is an effective technique to assess the behavior adopted by the individuals while making economic decisions, a number of them are ineffective when it comes to analyzing the effect of how the workers make decisions to save, manage the retirement investments and how they address their assets in retirement (Gai and Vause,  2004). As such, survey data can address these challenges, such that it involves defined contribution plans with or without investment decisions.

This study embraces first wave from HRS, which is a household survey that was initiated in 1992. Moreover, detailed demographic information of the participants, supplementary issues, the spouse’s pension eligibility and benefits from present or previous employer or other sources of pension integrated in the questionnaire. Owing to the fact that survey technique is of elderly population, the sample does not represent pen-age group, particularly, the sample of elderly group and hence assessing this data cannot adequately depict behavior adopted by the individuals while making economic decisions.

Data values with handful plan features will be suitable for empirical research in terms of contribution rates. Again, the study presents econometric effects of investment decisions, however it fails to assess the way in which decision feature will be integrated in the employee budget. Optimization model containing budget set design will be appropriate to investigate the impacts of pension to the next level.

In short the central debate in the paper was the behavior adopted by the individuals while making economic decisions and the reaction of the market towards these decisions, were divergent extensions would emerge. Individuals with DC plans cannot adequately control the exact amount of contribution from their salaries. Lastly, the study offers econometric impact of investment decision, however, it does not examine the decision variable will be a constraint on the budget of the individuals.

References

Ito, Takatoshi, 2002. Is Foreign Exchange Intervention Effective?: The Japanese Experiences in the 1990s. NBER Working Paper No. w8914. Available at SSRN: http://ssrn.com/abstract=309603

Jefferson, R. 2011. Rethinking the Risk of Defined Contribution Plans.

Kaminsky, L. R. 1997.”Leading Indicators of Currency Crises,” IMF Working Papers 97/79, International Monetary Fund.

Kolivakis, L. 2015. Advantages and Disadvantages of Defined Contribution Pensions. Bond economics. Retrieved on April 2, 2016 form http://www.bondeconomics.com/2015/12/advantages-and-disadvantages-of-defined.html

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