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

NBER Working Paper No. 21168
Issued in May 2015
NBER Program(s):AG, IFM

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 pre-retirement events that raise the marginal utility of consumption. On the other hand, pre-retirement 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 systems overwhelmingly illiquid before age 55.

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Document Object Identifier (DOI): 10.3386/w21168

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