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Risk Pooling and the Market Crash: Lessons From Canada’s Pension Plan

June 9, 2009
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Issue Brief by Ashby Monk and Steven A. Sass

The brief’s key findings are:

  • In the United States, workers hold equities in their 401(k)s, fully exposing them to a stock market crash.
  • Canada’s Pension Plan (CPP) offers an alternative approach –it pools equity risk, dampening the effects on individual households.
  • The CPP responds to a market crash by prompting policymakers to modestly adjust taxes and/or benefits.
  • With a very long-term horizon, the CPP can also respond to a market decline by buying assets at low prices, which helps stabilize the financial market.

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Headshot of Ashby Monk
Ashby Monk
Headshot of Steven A. Sass
Steven A. Sass
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Citation

Monk, and Steven A. Sass. 2009. "Risk Pooling and the Market Crash: Lessons From Canada's Pension Plan" Issue in Brief 9-12. Chestnut Hill, MA: Center for Retirement Research at Boston College.

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Topics
Social Security
Publication Type
Issue Brief
Publication Number
IB#9-12
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