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Effects of Public Policies on the Disposition of Lump-Sum Distributions: Rational and Behavioral Influences


  • William G. Gale
  • Michael Dworsky

    () (Brookings Institution)


This paper provides new evidence on how public policies affect individuals' disposition of pre-retirement lump-sum distributions (LSDs) from pensions. The policies, enacted in the 1980s and 1990s, include changes in tax rates, penalties, withholding rules, and default options. Using data from the Health and Retirement Study, we find that each set of policies influence LSD choices independently and through interactions with the other set. The impact of defaults and withholding rules implies that behavioral considerations influence household choices. This in turn creates the possibility that a wide range of policies could be used to change saving behavior.

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  • William G. Gale & Michael Dworsky, 2006. "Effects of Public Policies on the Disposition of Lump-Sum Distributions: Rational and Behavioral Influences," Working Papers, Center for Retirement Research at Boston College wp2006-15, Center for Retirement Research, revised Aug 2006.
  • Handle: RePEc:crr:crrwps:wp2006-15

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    References listed on IDEAS

    1. Christopher D Carroll, 1997. "Why Do the Rich Save So Much?," Economics Working Paper Archive 388, The Johns Hopkins University,Department of Economics.
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    6. Banks, James & Blundell, Richard & Tanner, Sarah, 1998. "Is There a Retirement-Savings Puzzle?," American Economic Review, American Economic Association, vol. 88(4), pages 769-788, September.
    7. Karen E. Dynan & Jonathan Skinner & Stephen P. Zeldes, 2004. "Do the Rich Save More?," Journal of Political Economy, University of Chicago Press, vol. 112(2), pages 397-444, April.
    8. Christopher D. Carroll, 1992. "The Buffer-Stock Theory of Saving: Some Macroeconomic Evidence," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(2), pages 61-156.
    9. James F. Moore & Olivia S. Mitchell, 1997. "Projected Retirement Wealth and Savings Adequacy in the Health and Retirement Study," NBER Working Papers 6240, National Bureau of Economic Research, Inc.
    10. B. Douglas Bernheim & John Karl Scholz, 1993. "Private Saving and Public Policy," NBER Chapters,in: Tax Policy and the Economy, Volume 7, pages 73-110 National Bureau of Economic Research, Inc.
    11. Arthur B. Kennickell & Martha Starr-McCluer & Annika E. Sunden, 1997. "Family finances in the U.S.: recent evidence from the Survey of Consumer Finances," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Jan, pages 1-24.
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    pre-retirement; lump-sum; distributions; withholding rules;

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