NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Liquidity in Retirement Savings Systems: An International Comparison

John Beshears, James J. Choi, Joshua Hurwitz, David Laibson, Brigitte C. Madrian

Chapter in NBER book Insights in the Economics of Aging (2017), David A. Wise, editor (p. 45 - 75)
Conference held April 30-May 2, 2015
Published in March 2017 by University of Chicago Press
© 2017 by the National Bureau of Economic Research
in NBER Book Series - The Economics of Aging

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.

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This chapter first appeared as NBER working paper w21168, Liquidity in Retirement Savings Systems: An International Comparison, John Beshears, James J. Choi, Joshua Hurwitz, David Laibson, Brigitte C. Madrian
Commentary on this chapter: Comment, Daniel McFadden
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