NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Abandoning the Nest Egg? 401(k) Plans and Inadequate Pension Saving

Andrew A. Samwick, Jonathan Skinner

NBER Working Paper No. 5568
Issued in May 1996
NBER Program(s):   AG   PE

There has been rapid growth in `self-directed' pension programs such as the 401(k) plan. Because such plans are voluntary, there is concern that many workers neglecting to contribute will reach retirement with inadequate pension saving. First, we show that people who are eligible for 401(k)s, do not contribute to them, and have no alternative pension plan make up only 2-4 percent of the workforce. By contrast, nearly 50 percent of workers have no pension coverage at all. Imposing mandatory 3 percent or 5 percent contribution rates will improve retirement prospects among the lowest decile of pension- eligible, but would have small aggregate effects. Finally, restricting 401(k) withdrawals when the worker changes jobs could have a larger impact on retirement pension security.

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Document Object Identifier (DOI): 10.3386/w5568

Published: Public Policy Towards Pensions, Schieber, Sylvester J. and John B. Shoven,eds., Cambridge: MIT Press, 1997, pp. 197-217.

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