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  4. May 2015
  5. Liquidity in Retirement Savings Systems: An International Comparison

Liquidity in Retirement Savings Systems: An International Comparison

  • John Beshears
  • James J. Choi
  • Joshua Hurwitz
  • David Laibson
  • Brigitte C. Madrian
American Economic Review
vol. 105, no. 5, May 2015
(pp. 420-25)
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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.

Citation

Beshears, John, James J. Choi, Joshua Hurwitz, David Laibson, and Brigitte C. Madrian. 2015. "Liquidity in Retirement Savings Systems: An International Comparison." American Economic Review, 105 (5): 420-25. DOI: 10.1257/aer.p20151004

Additional Materials

JEL Classification

  • D14 Household Saving; Personal Finance
  • J26 Retirement; Retirement Policies
  • J32 Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions