Defined Contribution Plans and the 2008 Financial Crisis

Private sector workers in the United States have witnessed a major shift in retirement planning. In the 1950s through the 1980s, defined benefit (DB) retirement plans were ubiquitous. In the 21st century, however, firms have eschewed DB plans, and now most private sector workers are covered by a defined contribution (DC) retirement plan. The shift to DC plans transferred identifiable market risk from the employer to the employee. In exchange for bearing more market risk, DC plans gave employees more control over their retirement accounts as they were now able to make the majority of investment decisions. Even as DC plans become more popular, many worried that this shift might make workers and their retirement more susceptible to large market shocks such as the 2008 financial crisis. In this thesis, I use the 2008 financial crisis as a natural experiment to test how well DC plans survive recessionary periods