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Liquidity in Retirement Savings Systems: An International Comparison

In: Insights in the Economics of Aging

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  • John Beshears
  • James J. Choi
  • Joshua Hurwitz
  • David Laibson
  • Brigitte C. Madrian

Abstract

We compare the liquidity that six developed countries have built into their employer-based defined contribution (DC) retirement schemes. In Germany, Singapore, and the UK, withdrawals are essentially banned no matter what kind of transitory income shock the household realizes. By contrast, in Canada and Australia, liquidity is state-contingent. For a middle-income household, DC accounts are completely illiquid unless annual income falls substantially, in which case DC assets become highly liquid. The US stands alone in the universally high liquidity of its DC system: whether or not income falls, the penalties for early withdrawal are low or non-existent.
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Suggested Citation

  • John Beshears & James J. Choi & Joshua Hurwitz & David Laibson & Brigitte C. Madrian, 2015. "Liquidity in Retirement Savings Systems: An International Comparison," NBER Chapters, in: Insights in the Economics of Aging, pages 45-75, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberch:13633
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    Cited by:

    1. Andersen, Torben M. & Bhattacharya, Joydeep, 2016. "Why mandate young borrowers to contribute to their retirement accounts?," ISU General Staff Papers 201609260700001016, Iowa State University, Department of Economics.
    2. Andersen, Torben M. & Bhattacharya, Joydeep, 2016. "Why mandate young borrowers to contribute to their retirement accounts?," ISU General Staff Papers 201609260700001016, Iowa State University, Department of Economics.
    3. John Beshears & James J. Choi & Christopher Harris & David Laibson & Brigitte C. Madrian & Jung Sakong, 2015. "Self Control and Commitment: Can Decreasing the Liquidity of a Savings Account Increase Deposits?," NBER Working Papers 21474, National Bureau of Economic Research, Inc.
    4. Teresa Ghilarducci & Siavash Radpour & Anthony Webb, 2018. "New Evidence on the Effect of Economic Shocks on Retirement Plan Withdrawals," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2018-03, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    5. Sumit Agarwal, 2015. "Age of Decision: Pension Savings Withdrawal and Consumption and Debt Response," 2015 Meeting Papers 709, Society for Economic Dynamics.

    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household

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