Liquidity in Retirement Savings Systems: An International Comparison
John Beshears, James J. Choi, Joshua Hurwitz, David Laibson, Brigitte C. Madrian
American Economic Review · 2015 · Volume 105 · Issue 5
Abstract
We compare the liquidity that six developed countries have built into their employer-based defined contribution (DC) retirement schemes. In Germany, Singapore, and the UK, withdrawals are essentially banned no matter what kind of transitory income shock the household realizes. By contrast, in Canada and Australia, liquidity is state-contingent. For a middle-income household, DC accounts are completely illiquid unless annual income falls substantially, in which case DC assets become highly liquid. The US stands alone in the universally high liquidity of its DC system: whether or not income falls, the penalties for early withdrawal are low or non-existent.
Keywords
Household Saving, Personal Finance, Retirement, Retirement Policies, Nonwage Labor Costs and Benefits, Retirement Plans, Private Pensions
Enable JavaScript for citation tools and additional paper interactions.