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Federal Tax Policy, Employer Matching, and 401(k) Saving: Evidence from HRS W-2 Records

  • Cunningham, Christopher R.
  • Engelhardt, Gary V.

We use panel data from W-2 records for households in the Health and Retirement Study (HRS) to examine the responsiveness of 401(k) saving to taxation, employer matching, and lifecycle factors. The limit on the tax deductibility of IRA contributions enacted in the Tax Reform Act of 1986 appears to have raised 401(k) saving by 6 percent. Individuals eligible for employer matching contribute substantially more, but this result is not robust once job and firm characteristics are taken into account. Alternative pension coverage greatly reduces 401(k) saving, whereas the ability to direct the investment of funds is associated with higher saving.

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Article provided by National Tax Association in its journal National Tax Journal.

Volume (Year): 55 (2002)
Issue (Month): 3 (September)
Pages: 617-45

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Handle: RePEc:ntj:journl:v:55:y:2002:i:3:p:617-45
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  1. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2001. "For Better or For Worse: Default Effects and 401(k) Savings Behavior," NBER Working Papers 8651, National Bureau of Economic Research, Inc.
  2. Leslie E. Papke, 1995. "Participation in and Contributions to 401(k) Pension Plans: Evidence from Plan Data," Journal of Human Resources, University of Wisconsin Press, vol. 30(2), pages 311-325.
  3. James M. Poterba & John B. Shoven & Clemens Sialm, 2000. "Asset Location for Retirement Savers," NBER Working Papers 7991, National Bureau of Economic Research, Inc.
  4. Shoven, John B. & Sialm, Clemens, 2004. "Asset location in tax-deferred and conventional savings accounts," Journal of Public Economics, Elsevier, vol. 88(1-2), pages 23-38, January.
  5. Martin Feldstein & Jeffrey B. Liebman, 2001. "Social Security," NBER Working Papers 8451, National Bureau of Economic Research, Inc.
    • Feldstein, Martin & Liebman, Jeffrey B., 2002. "Social security," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 32, pages 2245-2324 Elsevier.
  6. John B. Shoven, 1999. "The Location and Allocation of Assets in Pension and Conventional Savings Accounts," NBER Working Papers 7007, National Bureau of Economic Research, Inc.
  7. Alan L. Gustman & Thomas L. Steinmeier, 1999. "What People Don't Know About Their Pensions and Social Security: An Analysis Using Linked Data from the Health and Retirement Study," NBER Working Papers 7368, National Bureau of Economic Research, Inc.
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