Determinants of early-access to retirement savings: Lessons from the COVID-19 pandemic

Hazel Bateman, Loretti Dobrescu, Junhao Liu, Ben R. Newell and Susan Thorp

The Journal of the Economics of Ageing, 2023, vol. 24, issue C

Abstract: Australian regulations strictly limit early withdrawals from retirement plan accounts. However, in 2020, the Government made otherwise illiquid plan balances temporarily liquid, offering emergency relief during the pandemic. The COVID-19 Early Release Scheme allowed participants in financial hardship easy access to up to $A20,000 of savings over two rounds. We use administrative and survey data from a large retirement plan to describe how and why participants withdrew savings under the scheme. A majority report that they needed the money immediately but around one quarter said they anticipated future needs. Most thought about the decision for less than a week, acted soon after each round opened, and withdrew as much as they could. Many people did not estimate, or appear to have mis-estimated, the impact the withdrawal could have on their retirement savings. Our findings offer insights into preferences for liquidity. They also raise questions about whether the features of the early release scheme, and their implied endorsement by the Government, influenced some withdrawers more than personal deliberations over financial welfare.

Keywords: Pension early access; COVID-19; Retirement savings; Consumption smoothing; Precautionary liquidity (search for similar items in EconPapers)
JEL-codes: I38 J26 J32 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:joecag:v:24:y:2023:i:c:s2212828x23000014

DOI: 10.1016/j.jeoa.2023.100441

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