Lump Sum Distributions from Pension Plans: Recent Evidence and Issues for Policy and Research

Leonard E. Burman, Norma B. Coe, William G. Gale

Research output: Contribution to journalArticle

16 Scopus citations

Abstract

We examine preretirement lump sum distributions (LSDs) from pension plans, which have grown significantly in recent years. Most LSD recipients do not roll over the funds into qualified accounts, but the likelihood of rollover rises for larger distributions. We find evidence suggesting that tax penalties imposed in 1986 on nonrollovers by people younger than 55 raised the likelihood of rollovers among this group, but had much less effect on the likelihood that such households saved the funds, where saving includes investing in taxable assets and paying off debt. We estimate that cashouts reduce annual retirement income by up to $1,000-3,000.

Original languageEnglish (US)
Pages (from-to)553-562
Number of pages10
JournalNational Tax Journal
Volume52
Issue number3
StatePublished - Dec 1 1999
Externally publishedYes

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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