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Pre-Retirement Lump-Sum Pension Distributions and Retirement Income Security: Evidence From the Health and Retirement Study

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  • Engelhardt, Gary V.

Abstract

This paper uses the Health and Retirement Study to examine the extent of retirement wealth erosion from pre-retirement lump-sum pension distributions. There is little evidence that spent distributions have resulted in significant pension leakage. If spent distributions had been rolled over into a tax-qualified plan, they would have represented 5-11 percent of pension and Social Security wealth for the median household that spent a distribution. However, one-quarter of the households that spent distributions--which is 2.25 percent of all households age 51 to 61--could have increased retirement wealth by 25 percent or more had the distributions been rolled over.

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  • Engelhardt, Gary V., 2002. "Pre-Retirement Lump-Sum Pension Distributions and Retirement Income Security: Evidence From the Health and Retirement Study," National Tax Journal, National Tax Association;National Tax Journal, vol. 55(4), pages 665-685, December.
    • Handle: RePEc:ntj:journl:v:55:y:2002:i:4:p:665-85
    DOI: 10.17310/ntj.2002.4.01
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    References listed on IDEAS

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    1. David A. Wise, 1989. "The Economics of Aging," NBER Books, National Bureau of Economic Research, Inc, number wise89-1.
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    7. Burman, Leonard E. & Coe, Norma B. & Gale, William G., 1999. "Lump Sum Distributions From Pension Plans: Recent Evidence and Issues for Policy and Research," National Tax Journal, National Tax Association;National Tax Journal, vol. 52(3), pages 553-562, September.
    8. Burman, Leonard E. & Coe, Norma B. & Gale, William G., 1999. "Lump Sum Distributions from Pension Plans: Recent Evidence and Issues for Policy and Research," National Tax Journal, National Tax Association, vol. 52(n. 3), pages 553-62, September.
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    Cited by:

    1. James Poterba & Joshua Rauh & Steven Venti & David Wise, 2007. "Defined Contribution Plans, Defined Benefit Plans, and the Accumulation of Retirement Wealth," NBER Chapters, in: Public Policy and Retirement, Trans-Atlantic Public Economics Seminar (TAPES), pages 2062-2086, National Bureau of Economic Research, Inc.
    2. Miguel Lorca, 2021. "Effects of COVID‐19 early release of pension funds: The case of Chile," Journal of Risk & Insurance, The American Risk and Insurance Association, vol. 88(4), pages 903-936, December.
    3. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2004. "Saving or Retirement on the Path of Least Resistance," Levine's Bibliography 122247000000000606, UCLA Department of Economics.
    4. Clark, Robert L. & Morrill, Melinda Sandler & Vanderweide, David, 2014. "Defined benefit pension plan distribution decisions by public sector employees," Journal of Public Economics, Elsevier, vol. 116(C), pages 73-88.
    5. Gary V. Engelhardt & Anil Kumar, 2007. "Employer Matching and 401(k) Saving: Evidence from the Health and Retirement Study," NBER Chapters, in: Public Policy and Retirement, Trans-Atlantic Public Economics Seminar (TAPES), pages 1920-1943, National Bureau of Economic Research, Inc.
    6. Michelle Reyers & Daniël Gerhardus Gouws, 2014. "The rationality of retirement preservation decisions: A conceptual model," Journal of Economics and Behavioral Studies, AMH International, vol. 6(5), pages 418-431.
    7. Burman, Leonard E. & Coe, Norma B. & Dworsky, Michael & Gale, William G., 2012. "Effects of Public Policies on the Disposition of Pre-Retirement Lump-Sum Distributions: Rational and Behavioral Influences," National Tax Journal, National Tax Association;National Tax Journal, vol. 65(4), pages 863-887, December.
    8. Hurd, Michael & Panis, Constantijn, 2006. "The choice to cash out pension rights at job change or retirement," Journal of Public Economics, Elsevier, vol. 90(12), pages 2213-2227, December.
    9. Engelhardt, Gary V., 2003. "Reasons for job change and the disposition of pre-retirement lump-sum pension distributions," Economics Letters, Elsevier, vol. 81(3), pages 333-339, December.
    10. López, Fernando & Rosas, Guillermo, 2022. "COVID-19 and attitudes towards early withdrawal of pension funds: The role of trust and political ideology," The Journal of the Economics of Ageing, Elsevier, vol. 23(C).
    11. Robert Argento & Victoria L. Bryant & John Edward Sabelhaus, 2013. "Early withdrawals from retirement accounts during the Great Recession," Finance and Economics Discussion Series 2013-22, Board of Governors of the Federal Reserve System (U.S.).
    12. Reyers, Michelle & van Schalkwyk, Cornelis Hendrik & Gouws, Daniël Gerhardus, 2015. "Rational and behavioural predictors of pre-retirement cash-outs," Journal of Economic Psychology, Elsevier, vol. 47(C), pages 23-33.

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