Lump Sum Distributions from Pension Plans: Recent Evidence and Issues for Policy and Research

10 Pages Posted: 19 Jul 2014

See all articles by Leonard E. Burman

Leonard E. Burman

Tax Policy Center; Maxwell School; Urban Institute; Syracuse University - Center for Policy Research

Norma Coe

University of Pennsylvania - Perelman School of Medicine

William G. Gale

Brookings Institution

Date Written: September 1999

Abstract

We examine preretirement lump sum distributions (LSDs) from pension plans, which have grown significantly in recent years. Most LSD recipients do not roll over the funds into qualified accounts, but the likelihood of rollover rises for larger distributions. We find evidence suggesting that tax penalties imposed in 1986 on nonrollovers by people younger than 55 raised the likelihood of rollovers among this group, but had much less effect on the likelihood that such households saved the funds, where saving includes investing in taxable assets and paying off debt. We estimate that cashouts reduce annual retirement income by up to $1,000-3,000.

Keywords: lump sum distributions, pensions, retirement planning

JEL Classification: J26

Suggested Citation

Burman, Leonard E. and Coe, Norma and Gale, William G., Lump Sum Distributions from Pension Plans: Recent Evidence and Issues for Policy and Research (September 1999). National Tax Journal, Vol. 52, No. 3, 1999. Available at SSRN: https://ssrn.com/abstract=2467638

Leonard E. Burman

Tax Policy Center ( email )

Urban Institute
2100 M Street NW
Washington, DC 20009
United States
2022615742 (Phone)

Maxwell School ( email )

400 Eggers Hall
Syracuse, NY 13244
United States
315-443-3114 (Phone)

Urban Institute ( email )

2100 M Street, NW
Washington, DC 20037
United States
202-261-5248 (Phone)

Syracuse University - Center for Policy Research ( email )

Syracuse, NY 13244
United States

Norma Coe

University of Pennsylvania - Perelman School of Medicine ( email )

423 Guardian Drive
Philadelphia, PA 19104
United States

William G. Gale (Contact Author)

Brookings Institution ( email )

1775 Massachusetts Avenue, NW
Washington, DC 20036
United States
202-797-6148 (Phone)
202-797-6181 (Fax)

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