Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/324362 
Year of Publication: 
2025
Series/Report no.: 
IZA Discussion Papers No. 17964
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
This paper examines how individuals respond financially to severe health shocks by analyzing early withdrawals from retirement savings following the initiation of cancer treatment (chemotherapy). Using comprehensive administrative data from Australia that link health, tax, and demographic records, we study behavior in a setting with universal health coverage and a mandatory retirement savings scheme that permits early access under hardship provisions. We find that early withdrawals increase significantly in the year of and the year after treatment, particularly among individuals who lose income or receive a terminal diagnosis. To interpret these patterns, we extend a dynamic Grossman-style model of health capital to account for survival probabilities and institutional features of the retirement system. Our findings show that health shocks prompt individuals to draw down retirement savings as a form of self-insurance, revealing how health risks interact with retirement policy. These results inform ongoing debates about the flexibility and adequacy of retirement savings systems.
Subjects: 
administrative data
income loss
health shocks
early retirement withdrawals
life-cycle savings
JEL: 
H55
I10
D14
D15
J32
Document Type: 
Working Paper

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