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Deferring Income in Employer-Sponsored Retirement Plans: The Dynamics of Participant Contributions

Author

Listed:
  • Karen E. Smith

    () (Urban Institute)

  • Richard W. Johnson

    () (Urban Institute)

  • Leslie A. Muller

    () (Social Security Administration)

Abstract

This paper describes contributions to employer-sponsored retirement accounts, using newly available longitudinal data that combine administrative earnings records with survey data. The results reveal a fair amount of individual variability in contribution rates over time. However, potential negative shocks to income and increases in current consumption needs do not appear to lead workers to curtail their contributions. Instead, workers appear to raise their contribution rates after they have achieved key milestones in the lifecourse, such as the birth of a child or the purchase of a home.

Suggested Citation

  • Karen E. Smith & Richard W. Johnson & Leslie A. Muller, 2004. "Deferring Income in Employer-Sponsored Retirement Plans: The Dynamics of Participant Contributions," Working Papers, Center for Retirement Research at Boston College 2004-20, Center for Retirement Research.
  • Handle: RePEc:crr:crrwps:2004-20
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    File URL: http://crr.bc.edu/working-papers/deferring-income-in-employer-sponsored-retirement-plans-the-dynamics-of-participant-contributions/
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    References listed on IDEAS

    as
    1. Mitchell, Olivia S, 1988. "Worker Knowledge of Pension Provisions," Journal of Labor Economics, University of Chicago Press, vol. 6(1), pages 21-39, January.
    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. Leslie E. Papke & Mitchell A. Petersen & James M. Poterba, 1996. "Do 401(k) Plans Replace Other Employer-Provided Pensions?," NBER Chapters,in: Advances in the Economics of Aging, pages 219-240 National Bureau of Economic Research, Inc.
    4. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2002. "Defined Contribution Pensions: Plan Rules, Participant Choices, and the Path of Least Resistance," NBER Chapters,in: Tax Policy and the Economy, Volume 16, pages 67-114 National Bureau of Economic Research, Inc.
    5. James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2001. "Defined Contribution Pensions: Plan Rules, Participant Decisions, and the Path of Least Resistance," NBER Working Papers 8655, National Bureau of Economic Research, Inc.
    6. Brigitte C. Madrian & Dennis F. Shea, 2001. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1149-1187.
    7. Johnson, Richard W & Sambamoorthi, Usha & Crystal, Stephen, 2000. "Pension Wealth at Midlife: Comparing Self-Reports with Provider Data," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(1), pages 59-83, March.
    8. Jonathan Skinner, 1991. "Individual Retirement Accounts: A Review of the Evidence," NBER Working Papers 3938, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Teresa Ghilarducci & Joelle Saad-Lessler & Gayle Reznik, 2017. "Relative Wages in Aging America: Defined Contribution Wealth Inequality: Role of Earnings Shocks, Portfolio Choice, and Employer Contributions," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2017-06, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    2. repec:kap:jfamec:v:39:y:2018:i:1:d:10.1007_s10834-017-9536-5 is not listed on IDEAS
    3. Irena Dushi & Marjorie Honig, 2007. "Are 401(k) Saving Rates Changing? Cohort/Period Evidence from the Health and Retirement Study," Working Papers wp160, University of Michigan, Michigan Retirement Research Center.
    4. Rudolph G. Penner & Richard W. Johnson, 2006. "Health Care Costs, Taxes, and the Retirement Decision: Conceptual Issues and Illustrative Simulation," Working Papers, Center for Retirement Research at Boston College wp2006-20, Center for Retirement Research, revised Nov 2006.
    5. Anson T. Y. Ho & Jie Zhou, 2016. "Housing and Tax-Deferred Retirement Accounts," Staff Working Papers 16-24, Bank of Canada.
    6. repec:pal:gpprii:v:42:y:2017:i:4:d:10.1057_s41288-016-0037-9 is not listed on IDEAS

    More about this item

    Keywords

    retirement plans; contribution rates; saving; pension;

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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