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Effects of Public Policies on the Disposition of Pre-retirement Lump-Sum Distributions : Rational and Behavioral Influences

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  • Burman, L.E.
  • Coe, N.B.

    (Tilburg University, School of Economics and Management)

  • Dworsky, M.
  • Gale, W.G.

Abstract

We examine workers' disposition of pre-retirement lump-sum distributions, using policy changes in 1986 and 1992 as natural experiments. We find that higher taxes on cash-outs increase rollovers, consistent with both rational and behavioral motives. Several results, however, only make sense in a behavioral framework. Controlling for effective tax rates, structuring the tax as a "penalty" or adding withholding taxes on cash-outs increases rollovers. Allowing employers to unilaterally cash out balances for departing employees alters the impact of other policies. These results suggest that both rational and behavioral factors influence workers’ choices, and that policies can interact in important ways.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Burman, L.E. & Coe, N.B. & Dworsky, M. & Gale, W.G., 2008. "Effects of Public Policies on the Disposition of Pre-retirement Lump-Sum Distributions : Rational and Behavioral Influences," Other publications TiSEM 01623392-ad2e-4bed-b388-5, Tilburg University, School of Economics and Management.
    • Handle: RePEc:tiu:tiutis:01623392-ad2e-4bed-b388-547a8db40c1c
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    References listed on IDEAS

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    Cited by:

    1. Timothy (Jun) Lu & Olivia S. Mitchell & Stephen P. Utkus & Jean A. Young, 2017. "Borrowing From the Future? 401(K) Plan Loans and Loan Defaults," National Tax Journal, National Tax Association;National Tax Journal, vol. 70(1), pages 77-110, March.
    2. Teresa Ghilarducci & Siavash Radpour & Anthony Webb, 2018. "New Evidence on the Effect of Economic Shocks on Retirement Plan Withdrawals," SCEPA working paper series. 2018-03, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.

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    More about this item

    JEL classification:

    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents
    • D1 - Microeconomics - - Household Behavior

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