Early withdrawals from retirement accounts during the Great Recession
AbstractEarly withdrawals from retirement accounts are a double-edged sword, because withdrawals reduce retirement resources, but they also allow individuals to smooth consumption when they experience demographic and economic shocks. Using tax data, we show that pre-retirement withdrawals increased between 2004 and 2010, especially after 2007, but early withdrawal rates are substantial (relative to new contributions) in all of those years. Early withdrawal events are strongly correlated with shocks to income and marital status, and lower-income taxpayers are more likely to experience the types of shocks associated with early withdrawals and more likely to have a taxable withdrawal when they experience a given shock.
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Bibliographic InfoPaper provided by Board of Governors of the Federal Reserve System (U.S.) in its series Finance and Economics Discussion Series with number 2013-22.
Date of creation: 2013
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-AGE-2013-05-19 (Economics of Ageing)
- NEP-ALL-2013-05-19 (All new papers)
- NEP-DEM-2013-05-19 (Demographic Economics)
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- Hurd, Michael & Panis, Constantijn, 2006. "The choice to cash out pension rights at job change or retirement," Journal of Public Economics, Elsevier, vol. 90(12), pages 2213-2227, December.
- Amromin, Gene & Smith, Paul, 2003. "What Explains Early Withdrawals from Retirement Accounts? Evidence from a Panel of Taxpayers," National Tax Journal, National Tax Association, vol. 56(3), pages 595-612, September.
- Sabelhaus, John, 2000. "Modeling IRA Accumulation and Withdrawals," National Tax Journal, National Tax Association, vol. 53(n. 4), pages 865-76, December .
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