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The Impact of 401(k) Plans on Retirement

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  • Friedberg, Leora
  • webb, anthony

Abstract

In 1993 38.9 million people were covered by a 401(k) plan, up from 7.1 million in 1983. The rapid growth of 401(k) and other defined contribution pension plans may alter retirement patterns of older workers. Previous research showed that the spread of defined benefit plans, with sharp age-related incentives first discouraging and later encouraging retirement, contributed to the early retirement trend of past decades. Defined contribution plans differ along several dimensions, especially in their smooth rate of pension wealth accrual. We use data from the Health and Retirement Study to show that retirement patterns have begun to change as defined contribution plans have spread. Our estimates indicate that the financial incentives in defined benefit pensions lead people to retire almost two years earlier on average, compared to people with defined contribution plans.

Suggested Citation

  • Friedberg, Leora & webb, anthony, 2000. "The Impact of 401(k) Plans on Retirement," University of California at San Diego, Economics Working Paper Series qt2jr5w8b9, Department of Economics, UC San Diego.
    • Handle: RePEc:cdl:ucsdec:qt2jr5w8b9
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    References listed on IDEAS

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    Cited by:

    1. MacDonald, Bonnie-Jeanne & Cairns, Andrew J.G., 2011. "Three retirement decision models for defined contribution pension plan members: A simulation study," Insurance: Mathematics and Economics, Elsevier, vol. 48(1), pages 1-18, January.
    2. Purvi Sevak, 2002. "Wealth Shocks and Retirement Timing: Evidence from the Nineties," Working Papers wp027, University of Michigan, Michigan Retirement Research Center.

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