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How Economic Shocks Exacerbate Retirement Inequality

May 16, 2019

Workers in low-wage households are more likely to experience economic shocks and to withdraw from their retirement accounts, exacerbating pre-existing inequalities in the retirement savings system.

Household level economic shocks such as job loss, job change, divorce, and the onset of poor health are associated with about 20% of all retirement account withdrawals and exacerbate pre-existing inequalities in financial preparation for retirement. Workers in low-wage households are more likely to withdraw from their accounts than those in middle- and high-income households, in part because they experience more shocks and are more likely to withdraw from their retirement savings when they experience a shock.  The paper was published by the Journal of Retirement