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Implications of Rising Personal Retirement Saving

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  • James M. Poterba
  • Steven F. Venti
  • David A. Wise

Abstract

Retirement 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 Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6295.

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Date of creation: Mar 1999
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Publication status: published as Frontiers in the Economics of Aging. Wise, David, ed. pp. 125-172 (Chicago: University of Chicago Press, 1998)
Handle: RePEc:nbr:nberwo:6295

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  1. Patrick J. Bayer & B. Douglas Bernheim & John Karl Scholz, 1996. "The Effects of Financial Education in the Workplace: Evidence from a Survey of Employers," NBER Working Papers 5655, National Bureau of Economic Research, Inc.
  2. B. Douglas Bernheim & Daniel M. Garrett, 1996. "The Determinants and Consequences of Financial Education in the Workplace: Evidence from a Survey of Households," NBER Working Papers 5667, National Bureau of Economic Research, Inc.
  3. Thomas E. MaCurdy & John B. Shoven, 1992. "Stocks, Bonds, and Pension Wealth," NBER Chapters, National Bureau of Economic Research, Inc, in: Topics in the Economics of Aging, pages 61-78 National Bureau of Economic Research, Inc.
  4. 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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