What can the life-cycle model tell us about 401(k) contributions and participation?
AbstractThis paper solves and simulates a stochastic life-cycle model of an economy with 401(k) plans. We use the model to establish a benchmark for patterns of contributions and participation and show how these patterns depend on such features as employer matching, vesting policies, and the ability to make early withdrawals. Consistent with empirical studies, the model predicts relatively low participation rates among younger workers and shows that these rates tend to rise with more generous matching, lower vesting periods, and improved liquidity.
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Bibliographic InfoArticle provided by Cambridge University Press in its journal Journal of Pension Economics and Finance.
Volume (Year): 6 (2007)
Issue (Month): 02 (July)
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