TY  - JOUR
AU  - Mitchell,Olivia S.
AU  - Utkus,Stephen P.
AU  - Yang,Tongxuan (Stella)
TI  - Turning Workers into Savers? Incentives, Liquidity, and Choice in 401(k) Plan Design
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11726
PY  - 2005
Y2  - October 2005
UR  - http://www.nber.org/papers/w11726
L1  - http://www.nber.org/papers/w11726.pdf
N1  - Author contact info:
Olivia S. Mitchell
University of Pennsylvania
Wharton School
3620 Locust Walk, St 3000 SH-DH
Philadelphia, PA 19104-6302
Tel: 215-898-0424
Fax: 215/898-0310
E-Mail: mitchelo@wharton.upenn.edu

Stephen Utkus
Vanguard Center for Retirement Research
100 Vanguard Boulevard, M38
Malvern, PA  19355
E-Mail: steve_utkus@vanguard.com

Tongxuan Yang
AB  - We develop a comprehensive model of 401(k) pension design that reflects the complex tax, savings, liquidity and investment incentives of such plans. Using a new dataset on some 500 plans covering nearly 740,000 workers, we show that employer matching contributions have only a modest impact on eliciting additional retirement saving. In the typical 401(k) plan, only 10 percent of non-highly-compensated workers are induced to save more by match incentives; and 30 percent fail to join their plan at all, despite the fact that the company-proffered match would grant them a real return premium of 1-5% above market rates if they contributed. Such indifference to retirement saving incentives cannot be attributed to liquidity or investment constraints. These results underscore the need for alternative approaches beyond matching contributions, if retirement saving is to become broader-based.
ER  -