IDEAS home Printed from https://ideas.repec.org/p/crr/issbrf/ib2015-10.html
   My bibliography  Save this paper

Do Catch-Up Contributions Increase 401(k) Saving?

Author

Listed:
  • Qi Guan
  • Matthew S. Rutledge
  • April Yanyuan Wu
  • Francis M. Vitagliano

Abstract

Changes in the retirement landscape – rising life ex­pectancy, declining Social Security replacement rates, and vanishing traditional pensions – increase the need for individuals to save. The tax code encourages individuals to save in 401(k) plans by allowing tax-advantaged contributions up to specified limits. In 2001, policymakers increased these limits for all ages and established a new catch-up provision for work­ers age 50 or older, which allows them to contribute much more. This brief, which summarizes a recent study, assesses the extent to which the catch-up provision has increased 401(k) contributions. The discussion is structured as follows. The first section introduces the catch-up provision. The second section defines the data and the sample used in the analysis. The third section examines the characteristics of the group most likely to take advantage of the provision: the small percentage of workers who previously contributed near the maximum level. The fourth section analyzes how contributions changed after the adoption of the catch-up provision. The final section concludes that only those near the maximum respond to increased tax incentives to save in 401(k)s, which is consistent with previous research.

Suggested Citation

  • Qi Guan & Matthew S. Rutledge & April Yanyuan Wu & Francis M. Vitagliano, 2015. "Do Catch-Up Contributions Increase 401(k) Saving?," Issues in Brief ib2015-10, Center for Retirement Research.
    • Handle: RePEc:crr:issbrf:ib2015-10
    as

    Download full text from publisher

    File URL: http://crr.bc.edu/briefs/do-catch-up-contributions-increase-401k-saving/
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Raj Chetty & John N. Friedman & Søren Leth-Petersen & Torben Heien Nielsen & Tore Olsen, 2014. "Active vs. Passive Decisions and Crowd-Out in Retirement Savings Accounts: Evidence from Denmark," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 129(3), pages 1141-1219.
    2. Matthew S. Rutledge & April Yanyuan Wu & Francis M. Vitagliano, "undated". "Do Tax Incentives Increase 401 (K) Retirement Saving? Evidence from the Adoption of Catch-Up Contributions," Mathematica Policy Research Reports 9e3f2369237e4d798025ac66e, Mathematica Policy Research.
    3. Janette Kawachi & Karen E. Smith & Eric J. Toder, 2006. "Making Maximum Use Of Tax-Deferred Retirement Accounts," Working Papers, Center for Retirement Research at Boston College wp2005-19, Center for Retirement Research.
    4. Andrew Smith, 2005. "Making the paper," Nature, Nature, vol. 438(7066), pages 1-1, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Matthew S. Rutledge & April Yanyuan Wu & Francis M. Vitagliano, "undated". "Do Tax Incentives Increase 401 (K) Retirement Saving? Evidence from the Adoption of Catch-Up Contributions," Mathematica Policy Research Reports 9e3f2369237e4d798025ac66e, Mathematica Policy Research.
    2. Adam M. Lavecchia, 2018. "Do "Catch-Up Limits" Raise Retirement Saving? Evidence from a Regression Discontinuity Design," National Tax Journal, National Tax Association;National Tax Journal, vol. 71(1), pages 121-154, March.
    3. Persson, Petra, 2018. "Attention manipulation and information overload," Behavioural Public Policy, Cambridge University Press, vol. 2(1), pages 78-106, May.
    4. Justin Falk & Nadia Karamcheva, 2019. "The Effect of the Employer Match and Defaults on Federal Workers’ Savings Behavior in the Thrift Savings Plan: Working Paper 2019-06," Working Papers 55447, Congressional Budget Office.
    5. Mitchell, O.S. & Piggott, J., 2016. "Workplace-Linked Pensions for an Aging Demographic," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 865-904, Elsevier.
    6. Filiz-Ozbay, Emel & Guryan, Jonathan & Hyndman, Kyle & Kearney, Melissa & Ozbay, Erkut Y., 2015. "Do lottery payments induce savings behavior? Evidence from the lab," Journal of Public Economics, Elsevier, vol. 126(C), pages 1-24.
    7. Nikolov, Plamen & Adelman, Alan, 2019. "Do private household transfers to the elderly respond to public pension benefits? Evidence from rural China," The Journal of the Economics of Ageing, Elsevier, vol. 14(C).
    8. Annette Alstadsæter & Wojciech Kopczuk & Kjetil Telle, 2019. "Social networks and tax avoidance: evidence from a well-defined Norwegian tax shelter," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(6), pages 1291-1328, December.
    9. Louis Kaplow, 2014. "Government Policy and Labor Supply with Myopic or Targeted Savings Decisions," NBER Chapters, in: Tax Policy and the Economy, Volume 29, pages 159-193, National Bureau of Economic Research, Inc.
    10. Andersen, Henrik Yde, 2021. "Pension taxation, household debt and the real economy," Nationaløkonomisk tidsskrift, Nationaløkonomisk Forening, vol. 2021(1), pages 1-14.
    11. John Beshears & James J. Choi & David Laibson & Brigitte C. Madrian & William L. Skimmyhorn, 2022. "Borrowing to Save? The Impact of Automatic Enrollment on Debt," Journal of Finance, American Finance Association, vol. 77(1), pages 403-447, February.
    12. Sharmistha Self, 2015. "Boys' versus Girls' Schooling in Nepal: Does It Vary by the Extent of Mothers' Autonomy?," Oxford Development Studies, Taylor & Francis Journals, vol. 43(4), pages 448-465, December.
    13. Timothy F. Harris & Aaron Yelowitz, 2018. "Life Insurance Holdings And Well‐Being Of Surviving Spouses," Contemporary Economic Policy, Western Economic Association International, vol. 36(3), pages 526-538, July.
    14. Kreiner, Claus Thustrup & Leth-Petersen, Søren & Skov, Peer Ebbesen, 2017. "Pension saving responses to anticipated tax changes: Evidence from monthly pension contribution records," Economics Letters, Elsevier, vol. 150(C), pages 104-107.
    15. Ursina Kuhn, 2020. "Augmented wealth in Switzerland: the influence of pension wealth on wealth inequality," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 156(1), pages 1-16, December.
    16. Jing You & Miguel Niño‐Zarazúa, 2019. "The Intergenerational Impact of China's New Rural Pension Scheme," Population and Development Review, The Population Council, Inc., vol. 45(S1), pages 47-95, December.
    17. Andersen, Torben M. & Bhattacharya, Joydeep & Gestsson, Marias H., 2021. "Pareto-improving transition to fully funded pensions under myopia," Journal of Demographic Economics, Cambridge University Press, vol. 87(2), pages 169-212, June.
    18. M. Martin Boyer & Philippe d’Astous & Pierre-Carl Michaud, 2019. "Tax-Sheltered Retirement Accounts: Can Financial Education Improve Decisions?," Cahiers de recherche 1902, Chaire de recherche Industrielle Alliance sur les enjeux économiques des changements démographiques.
    19. Francisco Gomes & Michael Haliassos & Tarun Ramadorai, 2021. "Household Finance," Journal of Economic Literature, American Economic Association, vol. 59(3), pages 919-1000, September.
    20. Jonathan D. Ketcham & Nicolai V. Kuminoff & Christopher A. Powers, 2016. "Estimating the Heterogeneous Welfare Effects of Choice Architecture: An Application to the Medicare Prescription Drug Insurance Market," NBER Working Papers 22732, National Bureau of Economic Research, Inc.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:crr:issbrf:ib2015-10. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Amy Grzybowski or Christopher F Baum (email available below). General contact details of provider: https://edirc.repec.org/data/crrbcus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.