We study the association between human capital and rollovers into Individual Retirement Accounts (IRAs), using administrative records from the defined contribution savings plan for U.S. government employees: the Thrift Savings Plan (TSP). Employees who separate from government employment have the option to leave balances in the TSP, where fees are currently under 4 basis points. However, we estimate that more than a third of the TSP balances end up being rolled over into IRA accounts, which are very likely to have much higher fees. We find that educational attainment has a very small positive association with the propensity to roll balances out of the TSP (the extensive margin). Hence, when deciding whether to initiate a rollover, employees with higher levels of educational attainment choose higher fee investments. However, conditional on rolling money out of the TSP, we estimate a very small negative association between educational attainment and IRA fees measured as basis points (the intensive margin). Because the extensive and intensive associations have opposite signs and are each small to begin with, educational attainment has no economically meaningful association with retirement account fees paid by TSP participants. Similar small and/or null effects are observed for another human capital variable that we study in the TSP data: AFQT scores.
Beshears, John, James Choi, David Laibson, Brigitte Madrian, William Skimmyhorn, and Stephen Zeldes. "Education, Cognitive Performance, and Investment Fees." Columbia Business School, September 24, 2019.
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