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401(k) Participant Behavior in a Volatile Economy

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  • Barbara A. Butrica
  • Karen Elizabeth Smith

Abstract

The booms and busts of the late 1990s and 2000s have taken 401(k) plan participants on a rollercoaster ride. Using data from administrative tax records and household surveys, this paper examines how participants responded to these periods of economic expansions and contractions by documenting changes in 401(k) participation, contributions, and investment allocation from 1990 through 2010. Controlling for earnings, job changes, and other household factors, we show that 401(k) participation and contributions decline during recessions. The Great Recession could lower the 401(k) assets of the typical 30-year-old by as much as 9 percent at age 62.

Suggested Citation

  • Barbara A. Butrica & Karen Elizabeth Smith, 2012. "401(k) Participant Behavior in a Volatile Economy," Working Papers, Center for Retirement Research at Boston College wp2012-24, Center for Retirement Research, revised Nov 2012.
  • Handle: RePEc:crr:crrwps:wp2012-24
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    File URL: http://crr.bc.edu/working-papers/401k-participant-behavior-in-a-volatile-economy/
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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. Simonovits, András & Király, Balázs, 2016. "Megtakarítás és adózás egy önkéntes nyugdíjrendszerben - ágensalapú modellezés
      [Saving and taxation in a voluntary pension system: Towards an agent-based model]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(5), pages 473-500.
    3. James M. Poterba, 2014. "Retirement Security in an Aging Society," NBER Working Papers 19930, National Bureau of Economic Research, Inc.

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