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Pension Contributions, Pension Awareness, And Changing Personal Finances

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  • Margaret J. Lay

Abstract

Workers with 401(k)s and similar defined contribution pensions adjust contributions facing large fluctuations in personal finances. Using administrative tax records linked to the Health and Retirement Study, this paper shows that adjustments differ for contributors who are aware and unaware of their pension coverage. Unaware contributors are more likely to stop contributing facing deteriorating finances, but adjust contributions similarly along the intensive margin. For example, 25% of unaware contributors stop contributing facing earnings declines, but only 15% of aware contributors do so. These findings have implications for policies like automatic enrollment and information campaigns that encourage retirement savings. (JEL D14, J14, J32, D83)

Suggested Citation

  • Margaret J. Lay, 2019. "Pension Contributions, Pension Awareness, And Changing Personal Finances," Contemporary Economic Policy, Western Economic Association International, vol. 37(4), pages 673-693, October.
    • Handle: RePEc:bla:coecpo:v:37:y:2019:i:4:p:673-693
    DOI: 10.1111/coep.12420
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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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