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3. Lump-Sum Distributions from Retirement Saving Plans: Receipt and Utilization

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3. Lump-Sum Distributions from Retirement Saving Plans: Receipt and Utilization This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: Inquiries in the Economics of Aging Volume Author/Editor: David A. Wise, editor Volume Publisher: University of Chicago Press Volume ISBN: 0-226-90303-6 Volume URL: http://www.nber.org/books/wise98-2 Publication Date: January 1998 Chapter Title: 3. Lump-Sum Distributions from Retirement Saving Plans: Receipt and Utilization Chapter Author: James M. Poterba, Steven F. Venti Chapter URL: http://www.nber.org/chapters/c7082 Chapter pages in book: (p. 85 - 108) 3 Lump-Sum Distributions from Retirement Saving Plans : Receipt and Utilization James M. Poterba, Steven F. Venti, and David A. Wise The degree to which alternative pension systems preserve retirement benefits when individuals change jobs has long been a consideration in evaluating vari- ous retirement saving arrangements. Related preservation issues have also been raised with respect to targeted retirement saving accounts, such as individual retirement accounts (IRAs) and 401(k) plans, which permit contributors to withdraw funds, subject to a tax penalty, before they reach retirement age. As the incidence of targeted retirement saving plans increases, the number of tax- payers with the potential to trigger such withdrawals will also increase. Al- though a number of previous studies, including our own (1994a, 1995), have examined the determinants of participation and contribution behavior in retire- ment saving plans, withdrawal behavior has received much less attention. The incidence and disposition of withdrawals from pension plans or other saving plans, known as lump-sum distributions, is a key determinant of the financial status of elderly households. Consider a 35-year-old who has accu- mulated $10,000 in a defined contribution pension plan, and who changes jobs. If these funds remain in a defined c

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