What determines 401(k) participation and contributions?

Munnell

Alicia Haydock

Munnell, Alicia Haydock

Dept. of Finance, Carroll School of Management

Author

Sunden

Annika

Sunden, Annika

Author

Taylor

Catherine

Taylor, Catherine

Author

text

working paper

Chestnut Hill, Mass. Center for Retirement Research at Boston College20002000monographic

Chestnut Hill, Mass.

Center for Retirement Research at Boston College

2000

monographic

Englisheng

English

eng

electronicapplication/pdfborn digital

electronic

application/pdf

born digital

This paper uses the 1998 Survey of Consumer Finances to identify the factors that determine whether an eligible employee elects to participate in a 401(k) plan and the magnitude of the employees contribution. The conclusion is that the most important factor affecting employees participation and contribution decisions is their planning horizon. Those with planning periods of less than two years are much less likely to provide for retirement than those who have a more long-term perspective. These results are consistent with other studies suggesting that employee education can have a major impact on retirement saving. On the plan side, the most important determinants are the availability of an employer match and the ability of employees to gain access to their funds before retirement through withdrawal or borrowing. In short, good information about the need for retirement saving and good plan design can significantly increase participation and contributions. The question is whether employers have the incentive to make this effort under the new safe harbor nondiscrimination provisions.

Alicia H. Munnell, Annika Sunden and Catherine Taylor.

CRR WP2000-12

CRR WP

2000-12

http://crr.bc.edu/images/stories/Working_Papers/wp_2000-12.pdf

MChBEnglisheng

MChB

Englisheng

English

eng