NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Trends in Pension Cash-Out at Job Change and the Effects on Long-Term Outcomes

Philip Armour, Michael D. Hurd, Susann Rohwedder

Chapter in NBER book Insights in the Economics of Aging (2017), David A. Wise, editor (p. 15 - 39)
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

Might the financial security of working Americans during retirement be jeopardized by their ability to cash out their pension plans when they leave a job? Federal tax rules discourage such actions, but limited evidence suggests the practice is common. This paper uses long-term longitudinal data in the Health and Retirement Study to update prior findings, investigate cohort differences and study the long-term consequences of pension cash-out at job separation. We find pension cash-out is more concentrated among workers who experience economic or health shocks around the time of job separation. The most recent cohort of older workers more often cashed out pension balances and more frequently used the balances for spending or to pay off debt. This is likely due to job separations during or in the aftermath of the Great Recession. Long-term outcomes for those who cashed out balances are worse than for those who did not, but so were their baseline characteristics. Along with the fact that outcomes are similar across worker populations with or without access to pension cash-out, we conclude that the worse outcomes among workers who cashed out are due to shocks leading to cash-out behavior rather than to access to the cash-out option.

This chapter is no longer available for free download, since the book has been published. To obtain a copy, you must buy the book.
Order from Amazon.com

Machine-readable bibliographic record - MARC, RIS, BibTeX

Commentary on this chapter: Comment, James M. Poterba
Users who downloaded this chapter also downloaded* these:
Poterba w19930 Retirement Security in an Aging Society
Poterba Comment on "Trends in Pension Cash-Out at Job Change and the Effects on Long-Term Outcomes"
Hurd and Rohwedder w17203 Economic Preparation for Retirement
Goda, Shoven, and Slavov Differential Mortality by Income and Social Security Progressivity
Beshears, Choi, Laibson, and Madrian The Availability and Utilization of 401(k) Loans
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us