(with Camelia M. Kuhnen)

NBER Working Paper 29069, Forthcoming at the Journal of Finance, SSRN version updated December 2023

Abstract: Using administrative data for 63,000 individuals across 2,500,000 person-month observations, we find that wealthier individuals have better life insurance coverage, controlling for the value of the asset insured, namely, the consumption needs of dependents. This positive wealth-insurance correlation, which is surprising given the prevailing view that wealth substitutes for insurance, persists after allowing for wealth-related differences in risk or bequest preferences, pricing, background risk, education, employment, or liquidity constraints. Our findings call for further investigation of this wealth-coverage correlation but support theories emphasizing the role of insurance to smooth consumption across time and not just across states of the world. 

(Job Market Paper)

Draft available at SSRN, updated November 2023

Abstract: American households increasingly rely on employer-sponsored defined contribution plans to save for retirement. I show that litigation risk is an important factor that impacts these plans. Using a new database of over 35,000 plans covering more than $5 trillion in assets, I show that employers respond to increased litigation risk by excluding options from plan menus. Reduced choice decreases employees’ retirement wealth by up to 14% for mean-variance optimizing investors. Additional results based on observed choices from over 2 million employees show that reduced choice is associated with 3% lower balances on average.

Presentations: Financial Intermediation Research Society (FIRS) PhD Session (2023), Defined Contribution Institutional Investment Association Academic Forum (2023), Colorado Finance Summit PhD Session (2023), Midwest Finance Association (MFA, 2024), Georgia Tech-Atlanta Fed Household Finance (2024)* 

(*-Scheduled)

Awards: Colorado Finance Summit Best PhD Paper (2023)

Media Coverage: PLANSPONSOR

(with Julie Agnew, Angela Hung, Nicole Montgomery, and Susan Thorp)

TIAA Institute Research Dialogue | Issue no. 190, updated November 2022

Abstract:  White label funds are generically named funds that include one or more underlying funds. They are often named for the broad asset class the fund invests in. While white label funds are not new, they are increasingly popular options in defined contribution retirement plans. The reasons often cited for adoption of these generically named funds by plan sponsors include menu simplification, lower fund costs, and the potential to offer plan participants more sophisticated and diversified funds that can leverage the expertise of multiple fund managers. On the other hand, some requirements, like customized participant communications and increased fiduciary responsibility, add to administrative costs that can hinder greater white label fund adoption by plan sponsors. In this study, we utilize a new database of individual-level data from public sector defined contribution retirement plans. We aim to investigate the prevalence of white label funds in the public sector and begin to explore whether they are related to different participant investment allocations. This paper provides an enhanced view of how white label funds fit into plan menus. We also add insights into the understudied public sector defined contribution market. We outline several promising avenues for future research based on these preliminary findings.

Presentations: Boulder Summer Conference on Consumer Financial Decision Making, Poster Session (2024)* 

(*-Scheduled)

PRRL Research Study, September 2023

Abstract:  In this brief, the public-sector plan participant savings behaviors are analyzed by gender. Specifically, balances, contributions, and asset allocation by participants’ gender are studied. One of the key findings is that men have larger account balances relative to women across all age groups. On average, women in their 30s hold $0.69 for every $1 that similarly aged men have in their accounts. 

These differences are driven in part by two key forces: 

• Men contribute more than women to their retirement accounts, both in terms of dollar contributions and as a percentage of salary. 

  • The median dollar contribution for women in their 30s is $1,686 whereas the median contribution for similarly aged men is $2,391. 

  • When considered as a percentage of salary, the median contribution rate (dollar contributions divided by salary) is similar for women and men in their 20s, at 2.2 percent and 2.1 percent for women and men, respectively. However, the gender gap between contribution rates widens with age. The median contribution rate for women in their 30s is 3.1 percent and the rate for similarly aged men is 3.6 percent. For participants in their 50s, the median contribution rate for women is 4.1 percent vs. 5.4 percent for men.

• Men take on greater equity risk in their retirement portfolios, having a higher allocation to equity funds relative to women across all age groups.

  • Men in their 40s have an average of 51 percent of their accounts allocated to equity funds, whereas women have an average allocation to equity funds of 37 percent. 

PRRL Research Study, September 2023

Abstract:  This is the second edition of the State of Public-Sector DC Plans report based on the PRRL Database. The analysis reflects data for 267 plans across 457(b), 401(a), 401(k), and 403(b) DC plans; over 2.5 million state, county, city, and subdivision government employees; and $170 billion in assets as of year-end 2021. This publication serves as an update to the previous edition of the State of Public-Sector DC Plans report, which utilized 2019 data. This report analyzes contributions, loan activity, asset allocation, and account balances as of year-end 2021.   

(with Bridget Bearden)

EBRI Issue Brief | No. 552, February 2022

Abstract:  Increasing consideration of sustainable investing in retirement plans has been driven by growing recognition of climate change and evolving consumer preferences, as well as innovations in both data and investment products, heightened regulatory focus, and continued media coverage. As a first step toward providing objective research on this topic, this Issue Brief studies the adoption of one kind of sustainable investment — environmental, social, or governance (ESG) themed investment options — among public defined contribution (DC) plan participants.  

To study the prevalence and adoption of ESG investing in employer-sponsored retirement plans, we use data collected by the Public Retirement Research Lab (PRRL). In this Issue Brief, we study the ESG investment decisions of approximately 32,000 participants in public-sector defined contribution retirement plans. We show that using plan-level aggregate values to assess individual participants’ ESG investment decisions gives an incomplete picture in assessing participant preferences. While dollar allocations to ESG funds at a plan level may be small (on average, 2.7 percent in our sample), we find an overall ESG adoption rate of 31 percent and an average ESG allocation for ESG-investing participants of 14 percent. 

In addition, we find differences of ESG adoption relative to gender, age, tenure, and account balance among public retirement plan participants. We show that women are statistically significantly more likely to invest in ESG funds relative to men. Older participants, longer-tenured participants, and those with higher account balances are less likely to invest than their younger and less well-off counterparts. However, despite the general decline in ESG participation rates with age, we document that variation in ESG allocations across participants tends to increase with age.  This analysis provides an opportunity to begin a discussion on how plan design and governance impact not only sustainable investing within retirement plans but potentially engagement as well. We would expect these findings to apply to the experience of private-sector workplaces when active choice is present.