Gustafson: Defined Contribution Pensions and Retirement During the Financial Crisis – A Natural Experiment


I investigate how DC pensions affect retirement using a 1984 federal retirement system change that quasi-randomly assigns DC pensions. I find no evidence that DC pensions affect retirement before the financial crisis. During and after the crisis, employees with DC pensions retire less. This effect is largest for high-income employees. The average high-income employee with a DC pension delays retirement 1.4 to 3 months longer than a comparable non-DC employee does. I argue that this increased retirement delay is caused by a decline in DC pension value, which I estimate is equivalent to three months’ worth of income.


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