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How Do Management Fees Affect Retirement Wealth Under Mexico’s Personal Retirement Accounts System?


  • Emma Aguila
  • Michael D. Hurd
  • Susann Rohwedder


In 1997, Mexico transformed its pay-as-you-go social-security system to a fully funded system with personal retirement accounts, including management fees. This paper examines changes in retirement wealth resulting from this new system. It found management fees drained a significant proportion of individuals' retirement wealth and had the effect of increasing the number of persons claiming a government-subsidized minimum pension, particularly from the time the system was introduced in 1997 until adjustment to management fees in 2008. Since 2008, retirement wealth accumulation has been similar to that of the previous system.

Suggested Citation

  • Emma Aguila & Michael D. Hurd & Susann Rohwedder, 2014. "How Do Management Fees Affect Retirement Wealth Under Mexico’s Personal Retirement Accounts System?," Working Papers WR-1023, RAND Corporation.
  • Handle: RePEc:ran:wpaper:wr-1023

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    References listed on IDEAS

    1. Pietro Masci & Carolin A. Crabbe & Guillermo Larraín Ríos & Agustín Vidal-Aragón de Olives & The Principal Financial Group & Alberto Arenas de Mesa & Kenroy Dowers & Lawrence H. Thompson & Rafael Rofm, 2005. "A Quarter Century of Pension Reform in Latin America and the Caribbean: Lessons Learned and Next Steps," IDB Publications (Books), Inter-American Development Bank, number 41658 edited by Carolin A. Crabbe, February.
    2. John Beshears & James J. Choi & David Laibson & Brigitte C. Madrian, 2014. "Who Uses the Roth 401(k), and How Do They Use It?," NBER Chapters,in: Discoveries in the Economics of Aging, pages 411-440 National Bureau of Economic Research, Inc.
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    4. Indermit S. Gill & Ceren Ozer & Radu Tatucu, 2008. "What Can Countries in Other Regions Learn from Social Security Reform in Latin America?," World Bank Research Observer, World Bank Group, vol. 23(1), pages 57-76, January.
    5. David Tuesta, 2011. "A review of the pension systems in Latin America," Working Papers 1115, BBVA Bank, Economic Research Department.
    6. James Choi & David Laibson & Brigitte Madrian & Andrew Metrick, 2005. "Optimal Defaults and Active Decisions," Levine's Bibliography 666156000000000488, UCLA Department of Economics.
    7. Gabriel D. Carroll & James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2009. "Optimal Defaults and Active Decisions," The Quarterly Journal of Economics, Oxford University Press, vol. 124(4), pages 1639-1674.
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    9. Moisés J. Schwartz & Enrique E. Domínguez & Roberto Calderón-Colín, 2008. "Consumer Confusion; The Choice of AFORE," IMF Working Papers 08/177, International Monetary Fund.
    10. Brigitte C. Madrian & Dennis F. Shea, 2001. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1149-1187.
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    More about this item


    retirement wealth accumulation; retirement fund management fees; social security;

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions


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