Defined Contribution Plans Defined Benefit Plans and the Accumulation of Retirement Wealth

This paper simulates the distribution of retirement wealth under representative Defined Benefit (DB) and Defined Contribution (DC) plans. It uses data from the Health and Retirement Study (HRS) to explore how asset returns, earnings histories, and retirement plan characteristics contribute to the variation in retirement wealth outcomes. Average retirement wealth accruals under current DC plans exceed average accruals under private sector DB plans, although DC plans are also more likely to generate very low retirement wealth outcomes. The comparison of current DC plans with more generous public sector DB plans is less definitive, because public sector DB plans are more generous on average than their private sector DB counterparts.