The Evolution of Leakage and Retirement Asset Flows in the U.S.

45 Pages Posted: 11 Sep 2019

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: September 9, 2019

Abstract

We study flows between retirement savings accounts from 2003 to 2015, providing the most comprehensive estimates to date of leakage from tax-preferred retirement savings accounts to pre-retirement age individuals. To do so, we create a nationally-representative panel of individuals using administrative tax data, and calculate their retirement contributions, distributions, and transfers between accounts. We estimate that 20 percent of individual contributions to defined contribution accounts made by individuals age 47 or younger leave the retirement system within eight years. Additionally, we estimate the effect of life events on the probability of leakage using event study designs. We find that the probability of leakage increases by 250 percent when an individual changes jobs. Other types of events, such as income shocks, home purchases, and the onset of tuition payments are associated with smaller leakage effect sizes.

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, The Evolution of Leakage and Retirement Asset Flows in the U.S. (September 9, 2019). 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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