Set It and Forget It? Financing Retirement in an Age of Defaults

64 Pages Posted: 21 Oct 2022

See all articles by Lucas Goodman

Lucas Goodman

U.S. Department of the Treasury

Anita Mukherjee

Wisconsin School of Business

Shanthi Ramnath

Federal Reserve Bank of Chicago

Date Written: October 19, 2022

Abstract

Retirement savings abandonment is a rising concern connected to defined contribution systems and default enrollment. We use tax data on Individual Retirement Accounts (IRAs) to establish that for a recent cohort, 0.4% of retirement-age individuals abandoned an aggregate of $66 million, proxied by a failure to claim over ten years after a legal requirement to do so. Analysis of state unclaimed property databases suggests that workplace defined contribution plans are abandoned at a higher rate than IRAs. Finally, regression discontinuity estimates show that certain accounts created by default enrollment are at higher risk of abandonment by passive savers.

Keywords: retirement savings, defaults, escheatment

JEL Classification: D83, H24, H31, J32, J14, J63

Suggested Citation

Goodman, Lucas and Mukherjee, Anita and Ramnath, Shanthi, Set It and Forget It? Financing Retirement in an Age of Defaults (October 19, 2022). FRB of Chicago Working Paper No. 2022-50, Available at SSRN: https://ssrn.com/abstract=4254043 or http://dx.doi.org/10.2139/ssrn.4254043

Lucas Goodman

U.S. Department of the Treasury ( email )

1500 Pennsylvania Avenue
Washington, DC 20220
United States

Anita Mukherjee

Wisconsin School of Business ( email )

975 University Avenue
Madison, WI 53706
United States

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

Shanthi Ramnath (Contact Author)

Federal Reserve Bank of Chicago ( email )

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