Leakage from Retirement Savings Accounts in the U.S.

65 Pages Posted: 11 Sep 2019 Last revised: 14 Jul 2021

See all articles by Lucas Goodman

Lucas Goodman

U.S. Department of the Treasury

Kathleen Mackie

Joint Committee on Taxation

Jacob Mortenson

Joint Committee on Taxation, US Congress

Heidi Schramm

Joint Committee on Taxation, U.S. Congress

Date Written: June 1, 2021

Abstract

This paper generates new, aggregate estimates of retirement savings flows in the U.S. from 2003 to 2015, and provides detailed estimates of leakage from tax-preferred retirement savings accounts to pre-retirement age individuals. We create a nationally-representative panel of individuals using a sample of administrative tax data with over 140 million person-year observations. These data contain information on retirement contributions, distributions, and transfers between accounts. We estimate that between 2003 and 2015 distributions from defined contribution plans and IRAs to individuals age 50 or younger were equal to 22 percent of the contributions made by this age group. When estimating the correlation between common life events and the probability of leakage, we find that job separations correspond with an increase in the probability of leakage of over 200 percent. Job separations generating the receipt of unemployment insurance (UI) -- a proxy for an involuntary job separation -- are associated with higher leakage than non-UI separations. Other types of events, such as income shocks, home purchases, and the onset of tuition payments are also associated with leakage.

Keywords: Leakage, Retirement, Tax Policy, Defined Contribution, Defined Benefit, Job Loss, Tax Data

JEL Classification: H24, H31, J14, J63

Suggested Citation

Goodman, Lucas and Mackie, Kathleen and Mortenson, Jacob and Schramm, Heidi, Leakage from Retirement Savings Accounts in the U.S. (June 1, 2021). Available at SSRN: https://ssrn.com/abstract=3450866 or http://dx.doi.org/10.2139/ssrn.3450866

Lucas Goodman

U.S. Department of the Treasury ( email )

1500 Pennsylvania Avenue
Washington, DC 20220
United States

Kathleen Mackie

Joint Committee on Taxation ( email )

Room 1625 Longworth House Office Building
Washington, DC 20515
United States

Jacob Mortenson (Contact Author)

Joint Committee on Taxation, US Congress ( email )

502 Ford House Office Building
Washington, DC 20515
United States

HOME PAGE: http://www.jacobmortenson.com

Heidi Schramm

Joint Committee on Taxation, U.S. Congress ( email )

H2-502 Ford House Office Building
Washington, DC 20515
United States

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