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How Workers Use 401(k) Plans: The Participation, Contribution, and Withdrawal Decisions

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  • Bassett, William F.
  • Fleming, Michael J.
  • Rodrigues, Anthony P.

Abstract

This paper examines how workers use 401(k) plans by examining their participation, contribution, and withdrawal decisions. Sixty-five percent of eligible workers participate in 401(k) plans. Employee participation rises with income, age, job tenure, and education. While participation also rises if the employer matches contributions, 401(k) participation does not grow with the rate of matching. When pension plan assets are withdrawn in lump-sum distributions before retirement, just 28 percent of distribution recipients (representing 56 percent of distribution assets) roll over the withdrawn funds into tax-qualified savings plans. Our findings suggest that many workers, particularly those with low incomes, do not use 401(k) plans to save for retirement.

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Bibliographic Info

Article provided by National Tax Association in its journal National Tax Journal.

Volume (Year): 51 (1998)
Issue (Month): n. 2 (June)
Pages: 263-89

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Handle: RePEc:ntj:journl:v:51:y:1998:i:n._2:p:263-89

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  1. James M. Poterba & Steven F. Venti, 1994. "401(k) Plans and Tax-Deferred Saving," NBER Chapters, in: Studies in the Economics of Aging, pages 105-142 National Bureau of Economic Research, Inc.
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  7. Leslie E. Papke & Mitchell A. Petersen & James M. Poterba, 1996. "Do 401(k) Plans Replace Other Employer-Provided Pensions?," NBER Chapters, in: Advances in the Economics of Aging, pages 219-240 National Bureau of Economic Research, Inc.
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  18. Poterba, James M. & Venti, Steven F. & Wise, David A., 1995. "Do 401(k) contributions crowd out other personal saving?," Journal of Public Economics, Elsevier, vol. 58(1), pages 1-32, September.
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