Should the Government be Paying Investment Fees on $3 Trillion of Tax-Deferred Retirement Assets? / Mattia Landoni, Stephen P. Zeldes.

Format:

Book

Author/Creator:

Landoni, Mattia.

Contributor:

National Bureau of Economic Research.

Zeldes, Stephen P.

Series:

Working Paper Series (National Bureau of Economic Research) no. w26700.

NBER working paper series no. w26700

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

Under standard assumptions, both individuals and the government are indifferent between traditional tax-deferred retirement accounts and "front-loaded" (Roth) accounts. When we add investment fees to this benchmark, individuals are still indifferent but the government is not. We estimate that tax deferral increases demand for asset management services by $3 trillion, causing the government to pay $20.7 billion in corresponding annual fees. In a general equilibrium model with asset management services as differentiated products, we examine the incidence and welfare implications of the added demand. Tax deferral in our model produces a larger asset management industry, higher taxes, and lower social welfare.

Notes:

Print version record

January 2020.