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Financial Fragility, Financial Literacy and the Early Withdrawal of Retirement Savings During COVID-19

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  • Alison Preston

    (Business School, The University of Western Australia)

Abstract

Using micro-data from the 2020 Household, Income and Labour Dynamics in Australia (HILDA) Survey for a large nationally representative sample of adults aged 18-64, this paper examines the factors associated with the early withdrawal of retirement savings as a result of the coronavirus. Logistic regressions show that early withdrawal behaviour was in response to financial needs with the likelihood of making a withdrawal higher amongst the young, those classified as financially fragile, precariously employed, the unemployed, lone parents with dependent children, persons experiencing poor health and those with poor financial literacy. The results raise questions about the design of early release schemes and the objectives of the Australian retirement income system, including equity outcomes in retirement. Policy suggestions are discussed, including a call for suitable data for monitoring purposes. It is too early to assess the long-term effects of recent behaviour under the ERS.

Suggested Citation

  • Alison Preston, 2022. "Financial Fragility, Financial Literacy and the Early Withdrawal of Retirement Savings During COVID-19," Economics Discussion / Working Papers 22-12, The University of Western Australia, Department of Economics.
    • Handle: RePEc:uwa:wpaper:22-12
    Note: MD5 = d18fa033f8c333dfc7202b4d55e46617
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    File URL: https://ecompapers.biz.uwa.edu.au/paper/PDF%20of%20Discussion%20Papers/2022/DP%2022.12_Preston.pdf
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    References listed on IDEAS

    as
    1. Robert Argento & Victoria L. Bryant & John Sabelhaus, 2015. "Early Withdrawals From Retirement Accounts During The Great Recession," Contemporary Economic Policy, Western Economic Association International, vol. 33(1), pages 1-16, January.
    2. Sumit Agarwal & Jessica Pan & Wenlan Qian, 2020. "Age of Decision: Pension Savings Withdrawal and Consumption and Debt Response," Management Science, INFORMS, vol. 66(1), pages 43-69, January.
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    Cited by:

    1. Elena Moreno-García & Sergio Hernández-Mejía & Héctor Francisco Salazar Núñez, 2024. "Financial Literacy and Financial Fragility in Mexico," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 19(1), pages 1-21, Enero - M.

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    More about this item

    Keywords

    Retirement savings; early withdrawal; COVID-19; financial fragility; financial literacy; casual employment; gender;
    All these keywords.

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