An Investigation on Early Voluntary Withdrawals from Individual Retirement Accounts

An Empirical Study on an Emerging Market

Yilmaz Yildiz, Mehmet Baha Karan, Seyma Bayrak Salantur

Research output: Contribution to journalArticle

Abstract

Early withdrawals from individual retirement accounts are one of the main problems of pension companies in both developed and emerging countries. The aim of this study is to identify the potential reasons behind decisions to withdraw early from the individual retirement system in Turkey. Using Cox proportional hazards model, we find that there is a significant negative relationship between financial literacy and withdrawal probability. Our results reveal that men and younger individuals are more likely to make an early withdrawal. We also find that individuals who experience liquidity constraints and income shocks tend to withdraw their contracts earlier. Further analysis suggests that the effect of variables remarkably changes among different subgroups. We believe that our findings will assist both pension managers and policymakers to design better retirement plans and to take steps to prevent voluntary withdrawals in the long term.

Original languageEnglish
Pages (from-to)732-756
Number of pages25
JournalGeneva Papers on Risk and Insurance: Issues and Practice
Volume42
Issue number4
Early online date17 Feb 2017
DOIs
Publication statusPublished - Oct 2017
Externally publishedYes

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Empirical study
Individual retirement accounts
Emerging markets
Retirement
Pensions
Cox proportional hazards model
Financial literacy
Turkey
Managers
Emerging countries
Liquidity constraints
Politicians
Developed countries
Income shocks

Cite this

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An Investigation on Early Voluntary Withdrawals from Individual Retirement Accounts : An Empirical Study on an Emerging Market. / Yildiz, Yilmaz; Karan, Mehmet Baha; Bayrak Salantur, Seyma.

In: Geneva Papers on Risk and Insurance: Issues and Practice, Vol. 42, No. 4, 10.2017, p. 732-756.

Research output: Contribution to journalArticle

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