Final answer:
Making withdrawals from a policy before electing Lifetime Income Withdrawals reduces the policy's value, impacting future retirement income. Worker savings behaviors are influenced by both current income and future income expectations. Changes in savings and withdrawal patterns can have implications on the broader financial and social safety systems.
Step-by-step explanation:
Withdrawals made prior to the election of Lifetime Income Withdrawals will typically reduce the policy's value because the funds are being depleted sooner than anticipated. This can affect the policy's growth and its ability to provide income during retirement. Any reduction in the policy value before electing lifetime income withdrawals can subsequently affect the amount of income that can be elected.
Most workers save for retirement by leveraging the disparity between their current income and their anticipated future needs. When anticipating an increase in future income, it might change their current savings habits. If that future income becomes less certain, they may alter their behavior to save more aggressively in the present, demonstrating a saving behavior influenced by both current and expected future income.
In financial markets, which seek growth, any changes in income projections can shift behaviors. Furthermore, large institutions like banks and social safety nets, which are predicated on the notion of continuous growth, watch these factors closely. An individual altering their contributions by making early withdrawals or changing their savings rates can collectively, alongside others doing the same, affect these broader systems.