Article
| American Economic Review: Papers and Proceedings
Liquidity in Retirement Savings Systems: An International Comparison
by
John Beshears, James J. Choi, Joshua Hurwitz, David Laibson and Brigitte C. Madrian
|
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: Saving;
Financial Liquidity;
Retirement;
Canada;
Germany;
Australia;
United Kingdom;
United States;
Singapore;