Abandoning the Nest Egg? 401(k) Plans and Inadequate Pension Saving
AbstractThere has been rapid growth in `self-directed' pension programs such as the 401(k) plan. Because such plans are voluntary, there is concern that many workers neglecting to contribute will reach retirement with inadequate pension saving. First, we show that people who are eligible for 401(k)s, do not contribute to them, and have no alternative pension plan make up only 2-4 percent of the workforce. By contrast, nearly 50 percent of workers have no pension coverage at all. Imposing mandatory 3 percent or 5 percent contribution rates will improve retirement prospects among the lowest decile of pension- eligible, but would have small aggregate effects. Finally, restricting 401(k) withdrawals when the worker changes jobs could have a larger impact on retirement pension security.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5568.
Date of creation: May 1996
Date of revision:
Publication status: published as Public Policy Towards Pensions, Schieber, Sylvester J. and John B. Shoven,eds., Cambridge: MIT Press, 1997, pp. 197-217.
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Find related papers by JEL classification:
- J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
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- Mark Schreiner, 2001. "Measuring Savings," Microeconomics 0108004, EconWPA, revised 27 Dec 2001.
- Andrew A. Samwick & Jonathan Skinner, 1998. "How Will Defined Contribution Pension Plans Affect Retirement Income?," NBER Working Papers 6645, National Bureau of Economic Research, Inc.
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- Engelhardt, Gary V., 2003. "Reasons for job change and the disposition of pre-retirement lump-sum pension distributions," Economics Letters, Elsevier, vol. 81(3), pages 333-339, December.
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