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Insights in the Economics of Aging$
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David A. Wise

Print publication date: 2017

Print ISBN-13: 9780226426679

Published to Chicago Scholarship Online: September 2017

DOI: 10.7208/chicago/9780226426709.001.0001

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PRINTED FROM CHICAGO SCHOLARSHIP ONLINE (www.chicago.universitypressscholarship.com). (c) Copyright University of Chicago Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CHSO for personal use.date: 21 September 2021

Liquidity in Retirement Savings Systems

Liquidity in Retirement Savings Systems

An International Comparison

Chapter:
(p.45) 2 Liquidity in Retirement Savings Systems
Source:
Insights in the Economics of Aging
Author(s):

John Beshears

James J. Choi

Joshua Hurwitz

David Laibson

Brigitte C. Madrian

John Beshears

James J. Choi

Joshua Hurwitz

David Laibson

Brigitte C. Madrian

Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226426709.003.0003

What is the socially optimal level of liquidity in a retirement savings system? Liquid retirement savings are desirable because liquidity enables agents to flexibly respond to preretirement events that raise the marginal utility of consumption. On the other hand, preretirement liquidity is undesirable when it leads to under-saving arising from, for example, planning mistakes or self-control problems. This paper compares the liquidity that six developed economies have built into their employer-based defined contribution (DC) retirement savings systems. We find that all of them, with the sole exception of the United States, have made their DC retirement assets overwhelmingly illiquid before age 55. This paper compares the liquidity that six developed economies have built into their employer-based defined contribution (DC) retirement savings systems. We find that all of them, with the sole exception of the United States, have made their DC systems largely illiquid before age 55.

Keywords:   savings, pension, retirement, defined contribution, liquidity, withdrawal, early access, penalty, consumption smoothing, cross-country comparison

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