How Do Management Fees Affect Retirement Wealth Under Mexico's Personal Retirement Accounts System?
36 Pages Posted: 30 Jan 2014 Last revised: 18 Feb 2014
Date Written: December 18, 2013
In 1997, Mexico transformed its pay-as-you-go social-security system to a fully funded system with personal retirement accounts, including management fees. This paper examines changes in retirement wealth resulting from this new system. It found management fees drained a significant proportion of individuals’ retirement wealth and had the effect of increasing the number of persons claiming a government-subsidized minimum pension, particularly from the time the system was introduced in 1997 until adjustment to management fees in 2008. Since 2008, retirement wealth accumulation has been similar to that of the previous system.
Keywords: retirement wealth accumulation, retirement fund management fees, social security reform, Mexico
JEL Classification: H55, G23, J32
Suggested Citation: Suggested Citation