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Policy Options for Cutting Retirement Plan Leakages

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Abstract

Financial necessity is an important reason low-wage households are more likely to make pre-retirement withdrawals from their 401(k) plans. However, an increase in the tax penalty on early withdrawals may increase rather than discourage withdrawals, and a prohibition on withdrawals may decrease contributions. To ensure that all households both contribute to retirement plans and remain invested, retirement policy should both mandate contributions and prohibit pre-retirement withdrawals. Finally, if households are prohibited from using retirement savings to buffer pre-retirement shocks, policy interventions will be required to increase the financial resilience of working-age households.

Suggested Citation

  • Teresa Ghilarducci & Siavash Radpour & Bridget Fisher & Anthony Webb, 2016. "Policy Options for Cutting Retirement Plan Leakages," SCEPA policy note series. 2016-03, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    • Handle: RePEc:epa:cepapn:2016-03
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    1. David Laibson, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(2), pages 443-478.
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    More about this item

    Keywords

    Retirement; 401(k); GRA; Social Security;
    All these keywords.

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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