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Earnings Volatility and 401(k) Contributions

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Abstract

This paper finds that negative economic shocks cause 401(k) contribution behavior to react in ways consistent with reactions to fear and past trauma. If employees participating in 401(k) plans did not experience real earnings declines or unemployment spells between 2009 and 2012, then their contribution rates would have been 5% higher and each person would have contributed US $193 more toward their defined contribution plan accounts.

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  • Teresa Ghilarducci & Joelle Saad-Lessler & Gayle Reznik, 2017. "Earnings Volatility and 401(k) Contributions," SCEPA working paper series. 2017-07, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    • Handle: RePEc:epa:cepawp:2017-14
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    1. Martin Browning & Annamaria Lusardi, 1996. "Household Saving: Micro Theories and Micro Facts," Journal of Economic Literature, American Economic Association, vol. 34(4), pages 1797-1855, December.
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    4. Leslie A. Muller & John A. Turner, 2011. "The Persistence of Employee 401(k) Contributions Over a Major Stock Market Cycle: Evidence on the Limited Power of Inertia on Savings Behavior," Upjohn Working Papers 11-174, W.E. Upjohn Institute for Employment Research.
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    Cited by:

    1. Teresa Ghilarducci & Siavash Radpour & Anthony Webb, 2018. "New Evidence on the Effect of Economic Shocks on Retirement Plan Withdrawals," SCEPA working paper series. 2018-03, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    2. Ghilarducci, Teresa & Radpour, Siavash & Webb, Anthony, 2022. "Retirement plan wealth inequality: measurement and trends," Journal of Pension Economics and Finance, Cambridge University Press, vol. 21(1), pages 119-139, January.
    3. Marta Cota, 2023. "Extrapolative Income Expectations and Retirement Savings," CERGE-EI Working Papers wp751, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

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    More about this item

    Keywords

    private pensions; non-wage compensation; 401(k) plans; retirement savings;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions

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