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Factors Influencing the Choice of Pension Distribution at Retirement

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Listed:
  • Robert L. Clark
  • Olivia S. Mitchell

Abstract

One of the most important financial decisions that pension participants make concerns how they access their pension assets when they terminate employment with their plan sponsor. Their choices depend both on own preferences and the options offered by their retirement plan. This paper examines both past and future pension withdrawal choices for those with defined benefit and defined contribution pensions, separately. Our data are drawn from a set of pension distribution questions we fielded in the Understanding American Study. Results show significant differences in distribution choices based on the type of retirement plan, with individuals covered by defined benefit plans significantly more likely to select annuities compared to similar employees covered by defined contribution plans. We also find differences in how higher annual income affects annuity choices based on coverage by DB plans. Individuals with lower levels of financial literacy and lower annual income have less knowledge of basic pension characteristics.

Suggested Citation

  • Robert L. Clark & Olivia S. Mitchell, 2022. "Factors Influencing the Choice of Pension Distribution at Retirement," NBER Working Papers 30115, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30115
    Note: AG LS
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    Cited by:

    1. Weiss-Cohen, Leonardo & Newall, Philip Warren Stirling & Ranyard, Rob & Ayton, Peter & Clacher, Iain, 2023. "Revalidating Fernandes et al.’s 2014 financial literacy scale in response to ongoing legislative and behavioral changes," OSF Preprints 493x7, Center for Open Science.

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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