Implications of Rising Personal Retirement Saving
AbstractRetirement saving accounts, particularly employer-provided 401(k) plans rapidly in the last decade. More than forty percent of workers are currently eligible for these" plans, and over seventy percent of eligibles participate in these plans. The substantial and" ongoing accumulation of assets in these plans has the potential to significantly alter the financial" preparations for retirement by future retirees. This paper uses data on current age-specific" patterns of 401(k) participation, in conjunction with Social Security earnings records that provide" detailed information on age-earnings profiles over the lifetime, to project the 401(k) balances of" future retirees. The results, which are illustrated by reference to individuals who were 27 and 37" in 1996, demonstrate the growing importance of 401(k) saving. The projected mean 401(k)" balance at retirement for a current 37 year old is $91,600, assuming that the 401(k) plan assets" are invested half in stocks and half in bonds. For a current 27 year old $125,000. These results support the growing importance of personal saving through retirement" saving accounts in contributing to financial well-being in old age.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6295.
Date of creation: Mar 1999
Date of revision:
Publication status: published as James M. Poterba, Steven F. Venti. "Implications of Rising Personal Retirement Saving," in David A. Wise, editor, "Frontiers in the Economics of Aging" University of Chicago Press (1998)
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Other versions of this item:
- J14 - Labor and Demographic Economics - - Demographic Economics - - - Economics of the Elderly; Economics of the Handicapped; Non-Labor Market Discrimination
- J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
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