Chapter

Preretirement Cashouts and Foregone Retirement Saving: Implications for 401(k) Asset Accumulation

Edited by James M. Poterba, Steven F. Venti and David A. Wise

in Themes in the Economics of Aging

Published by University of Chicago Press

Published in print November 2001 | ISBN: 9780226902845
Published online February 2013 | e-ISBN: 9780226903330 | DOI: http://dx.doi.org/10.7208/chicago/9780226903330.003.0002
Preretirement Cashouts and Foregone Retirement Saving: Implications for 401(k) Asset Accumulation

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This chapter draws together previous research on withdrawals from retirement saving plans to gauge the importance of such withdrawals on the saving balances of future retirees. The chapter is organized as follows. Section 1.1 summarizes the recent studies that have explored the importance of lump-sum distributions from 401(k) plans and other retirement saving plans. Section 1.2 describes the algorithm for projecting the 401(k) balances of future cohorts of retirees, and particularly researchers' attempts to allow for preretirement asset withdrawals. Section 1.3 presents evidence on how actual 401(k) balances for households in the Health and Retirement Survey compare with the balances that the algorithm would have predicted for these households, if actual plan balance was unknown. Section 1.4 reports projected future account balances and examines the importance of preretirement withdrawals in affecting these balances. Section 1.5 reports preliminary statistics on 401(k) participation from the 1995 Survey of Income and Program Participation, and uses these data to provide some indication of the plausibility of the projected rates of 401(k) expansion. Finally, a brief concluding section suggests several directions for further work. A commentary is also included at the end of the chapter.

Keywords: retirement savings plans; saving balance; retirement income; 401(k) plans; retirees; preretirement asset withdrawals

Chapter.  13452 words.  Illustrated.

Subjects: Economics

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