The vast majority of Individual Retirement Account contributions represent net new saving, based on evidence from the quarterly Consumer Expenditure Surveys (CES). The results are based on analysis of the relationship between IRA contributions and other financial asset saving. The data show almost no substitution of IRAs for other saving. While the core of the paper is based on cross-section analysis, important use is made of the CES panel of independent cross-sections that span the period during which IRAs were introduced. Estimates for the post 1982 period, when IRAs were available to all employees, are based on a flexible constrained optimization model, with the IRA limit the principle constraint. The implications of this model for saving in the absence of the IRA option match very closely the actual non-IRA financial asset saving behavior prior to 1982. IRA saving does not show up as other financial asset saving in the pre-IRA period.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
2217.
Length: Date of creation: Apr 1987 Date of revision: Handle: RePEc:nbr:nberwo:2217
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B. Douglas Bernheim & John B. Shoven, 1985.
"Pension Funding and Saving,"
NBER Working Papers
1622, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)
Other versions:
B. Douglas Bernheim & John B. Shoven, 1988.
"Pension Funding and Saving,"
NBER Chapters,
in: Pensions in the U.S. Economy, pages 85-114
National Bureau of Economic Research, Inc.
[Downloadable!]
Michael D. Hurd & John B. Shoven, 1983.
"The Economic Status of the Elderly,"
NBER Chapters,
in: Financial Aspects of the United States Pension System, pages 359-398
National Bureau of Economic Research, Inc.
[Downloadable!]
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