Skip to main content
Article thumbnail
Location of Repository

Optimal savings with taxable and tax-deferred accounts

By Francisco Gomes, Alexander Michaelides and Valery Polkovnichenko

Abstract

We solve and estimate a life-cycle model with earnings risk and liquidity constraints in the presence of tax-deferred retirement accounts (TDAs). We explicitly consider two very different types of households (with TDAs): direct and indirect stockholders. The latter hold stocks only through TDAs and, consistent with the data, save considerably less than the former, who hold stocks both inside and outside these accounts. We find that TDAs promote higher wealth accumulation but only marginally higher net savings. Consumption increases mostly during retirement, as desired, but the effect is largest for those households with higher savings rates already

Topics: HG Finance, HB Economic Theory
Publisher: Elsevier
Year: 2009
DOI identifier: 10.1016/j.red.2009.01.004
OAI identifier: oai:eprints.lse.ac.uk:27728
Provided by: LSE Research Online
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://www.elsevier.com/wps/fi... (external link)
  • http://eprints.lse.ac.uk/27728... (external link)
  • Suggested articles


    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.