How Does Dipping into Your Pension Affect Your Retirement Wealth?
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.
|Date of creation:||Aug 2001|
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- 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.
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- 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.
- Gustman, Alan L. & Steinmeier, Thomas L., 1999. "Effects of pensions on savings: analysis with data from the health and retirement study," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 271-324, June.
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