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How Does Dipping into Your Pension Affect Your Retirement Wealth?

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    Abstract

    Although pensions, both public and private, are intended to provide income during retirement, a growing number of American workers receive part or all their employer-provided pensions in the form of a cash settlement, called a lump-sum distribution, when they change jobs. They have many choices of what to do with that money: for example, they can rool it over into an Individual Retirement Account (IRA), spend the money or pay or debt, transfer it to the pension plan of a new employer, or even leave the money with the old employer's pension plan. Policymakers are concerned that workers who spend their pension distributions on current consumption are depriving themselves of the financial resources they will need for retirement. This policy brief describes some results from an ongoing study on the long-term economic consequences of lump-sum pension distributions. The study uses detailed information on employment histories, pensions, and wealth from Wave 1 (1992) of the Health and Retirement Study (HRS), a nationally representative survey of individuals between the ages of 41 and 61.

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    File URL: http://www.maxwell.syr.edu/uploadedFiles/cpr/publications/pb22.pdf
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    Bibliographic Info

    Paper provided by Center for Policy Research, Maxwell School, Syracuse University in its series Center for Policy Research Policy Briefs with number 22.

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    Length: 26 pages
    Date of creation: Aug 2001
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    Handle: RePEc:max:cprpbr:22

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    1. Olivia Mitchell & Jan Olson & Thomas Steinmeier, 1996. "Construction of the Earnings and Benefits File (EBF) for Use With the Health and Retirement Survey," NBER Working Papers 5707, National Bureau of Economic Research, Inc.
    2. Alan L. Gustman & Thomas L. Steinmeier, 1998. "Effects of Pensions on Saving: Analysis with Data from the Health and Retirement Study," NBER Working Papers 6681, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Andrew A. Samwick & Jonathan Skinner, 2004. "How Will 401(k) Pension Plans Affect Retirement Income?," American Economic Review, American Economic Association, vol. 94(1), pages 329-343, March.

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