Should the Government be Paying Investment Fees on $3 Trillion of Tax-Deferred Retirement Assets?
Under standard assumptions, both individuals and the government are indifferent between traditional tax-deferred retirement accounts and “front-loaded” (Roth) accounts. When we add investment fees to this benchmark, individuals are still indifferent but the government is not. We estimate that tax deferral increases demand for asset management services by $3 trillion, causing the government to pay $20.7 billion in corresponding annual fees. In a general equilibrium model with asset management services as differentiated products, we examine the incidence and welfare implications of the added demand. Tax deferral in our model produces a larger asset management industry, higher taxes, and lower social welfare.
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Copy CitationMattia Landoni and Stephen P. Zeldes, "Should the Government be Paying Investment Fees on $3 Trillion of Tax-Deferred Retirement Assets?," NBER Working Paper 26700 (2020), https://doi.org/10.3386/w26700.Download Citation
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Published Versions
Mattia Landoni & Stephen P Zeldes, 2025. "Should the Government Be Paying Investment Fees on $3 Trillion of Tax-Deferred Retirement Assets?," The Review of Financial Studies, Society for Financial Studies, vol. 38(4), pages 1014-1066. citation courtesy of 
Mattia Landoni & Stephen P Zeldes & Tarun Ramadorai, 2025. "Should the Government Be Paying Investment Fees on $3 Trillion of Tax-Deferred Retirement Assets?," The Review of Financial Studies, vol 38(4), pages 1014-1066.
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