← Search

American Economic Review Vol. 105 No. 5 2015

Liquidity in Retirement Savings Systems: An International Comparison

John Beshears1; James J. Choi2; Joshua Hurwitz3; David Laibson4; Brigitte C. Madrian5

1 Harvard Business School, Baker Library 439, Soldiers Field, Boston, MA 02163 (e-mail: ) · 2 Yale School of Management, 165 Whitney Avenue, PO Box 208200, New Haven, CT 06520 (e-mail: ) · 3 National Bureau of Economic Research, 1050 Massachusetts Avenue, Cambridge, MA 02138 (e-mail: ) · 4 Department of Economics, Harvard University, Littauer Center, 1805 Cambridge Street, Cambridge, MA 02138 (e-mail: ) · 5 Harvard Kennedy School, 79 JFK Street, Cambridge, MA 02138 (e-mail: )

open access

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.

DOI
10.1257/aer.p20151004
Volume
105
Issue
5
Pages
420-425
Language
en
Sources
openalex bibtex:phds-export.bib crossref

Cite