Temporary and permanent effects of withdrawal penalties on retirement savings accounts✩

Gopi Goda, Damon Jones and Shanthi Ramnath

Journal of Public Economics, 2022, vol. 215, issue C

Abstract: We investigate the impact of the early withdrawal penalty on Individual Retirement Account (IRA) withdrawals by examining behavior in a short window before and after the age when the penalty is lifted. We find a large, sudden increase in withdrawals after the penalty’s expiration of 3–3.5 times the baseline level, with no evidence of anticipatory behavior. After one month, average withdrawals decline to and persist at approximately double the baseline. We find that the short-run increase is more pronounced when liquidity constraints are more likely to have been binding. Finally, we explore the implications of our results for policies that adjust the age at which early penalties expire or policies that temporarily remove such penalties.

Keywords: Retirement savings accounts; Withdrawals; Distributions; Penalty (search for similar items in EconPapers)
JEL-codes: D14 H24 J32 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0047272722001360
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pubeco:v:215:y:2022:i:c:s0047272722001360

DOI: 10.1016/j.jpubeco.2022.104734

Access Statistics for this article

Journal of Public Economics is currently edited by R. Boadway and J. Poterba

More articles in Journal of Public Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().