Author:
Bütler Monika,Ramsden Alma
Abstract
Abstract
We analyze how taxes affect the choice between a life-long annuity and a one-off lump sum payment, the so-called annuitization decision. Using administrative data from a large Swiss pension fund, we impute taxes for the lump sum and the life-long annuity option. We show that taxes can explain a significant part of the variation in annuity rates. Exploiting kinks in the tax schedule of the one-off lump sum, we further find evidence for tax optimization strategies. Our findings suggest that individuals react strongly to tax incentives when making retirement choices.
Publisher
Cambridge University Press (CUP)
Subject
Organizational Behavior and Human Resource Management,Economics and Econometrics,Finance,General Medicine
Cited by
2 articles.
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