Do required minimum distribution 401(k) rules matter, and for whom? Insights from a lifecylce model

  • Tax-qualified vehicles helped U.S. private-sector workers accumulate $25Tr in retirement assets. An often-overlooked important institutional feature shaping decumulations from these retirement plans is the “Required Minimum Distribution” (RMD) regulation, requiring retirees to withdraw a minimum fraction from their retirement accounts or pay excise taxes on withdrawal shortfalls. Our calibrated lifecycle model measures the impact of RMD rules on financial behavior of heterogeneous households during their worklives and retirement. We show that proposed reforms to delay or eliminate the RMD rules should have little effects on consumption profiles but more impact on withdrawals and tax payments for households with bequest motives.

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Author:Vanya Horneff, Raimond MaurerGND, Olivia S. MitchellORCiDGND
URN:urn:nbn:de:hebis:30:3-616576
DOI:https://doi.org/10.2139/ssrn.3811594
Parent Title (English):LawFin working paper ; No. 17
Series (Serial Number):LawFin Working Paper (17)
Publisher:Center for Advanced Studies on the Foundations of Law and Finance, House of Finance, Goethe University
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2021
Year of first Publication:2021
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2021/09/09
Tag:401(k) plan; household finance; life cycle saving; retirement; tax policy
Issue:February 2021
Page Number:40
Last Page:38
Institutes:Rechtswissenschaft / Rechtswissenschaft
Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Wissenschaftliche Zentren und koordinierte Programme / DFG-Forschergruppen / Foundation of Law and Finance
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
3 Sozialwissenschaften / 34 Recht / 340 Recht
Sammlungen:Universitätspublikationen
Licence (German):License LogoDeutsches Urheberrecht