Self-Control and Early Withdrawal from Retirement Accounts

• In Event: Saving for Retirement

Abstract

Using a survey-elicited measure of psychological self-control and a policy change in Australia during COVID–19, we find that self–control issues significantly predict early withdrawals from retirement accounts. Individuals in the top quintile of self-control issues are 60% more likely to withdraw than those in the bottom quintile. Self-control is a stronger predictor of early withdrawal than other behavioral factors such as financial literacy, planning horizons, or personality traits. The effects are economically meaningful: eliminating self–control issues could have reduced early withdrawals by 23% — almost as large as the effect of adverse income shocks on withdrawals during COVID–19.

Author

• Patrick Moran, Federal Reserve Board & Institute for Fiscal Studies