Savings, Retirement Behavior and Required Minimum Distributions

Abstract

This dissertation studies the impact of Required Minimum Distribution (RMD) rules onsavings, labor participation and retirement asset decumulation of individuals before and after retirement. I document the withdrawal pattern of tax-deferred retirement assets of male individuals age 60+ in the U.S. and show that the RMD policy is a binding constraint. A structural life-cycle model of labor supply, retirement and savings is then developed and estimated using the data from SIPP and HRS. The model simulations indicate that the RMD policy is binding due to decreased mortality rates at older ages and end-of-life bequest motives. Removing the RMD rules in the counterfactual experiment results in a 2.67% increase in welfare as evaluated on a utility-equivalent basis and a reduction in federal income tax revenue of 0.994%.