Rise of 401(k) Plans, Lifetime Earnings, and Wealth at Retirement

James Poterba, Steven F. Venti, David A. Wise

NBER Working Paper No. 13091
Issued in May 2007
NBER Program(s):Economics of Aging

Saving through private pensions has been an important complement to Social Security in providing for the financial needs of older Americans. In the past twenty five years, however, there has been a dramatic change in private retirement saving. Personal retirement accounts have replaced defined benefit pension plans as the primary means of retirement saving. It is important to understand how this change will affect the wealth of future retirees. The personal retirement account system is not yet mature. A person who retired in 2000, for example, could have contributed to a 401(k) for at most 18 years and the typical 401(k) participant had only contributed for a little over seven years. Nonetheless, current 401(k) assets are quite large. We consider in this paper the implications of rising 401(k) saving through the year 2040. In particular, we emphasize the growth of the sum of Social Security wealth and 401(k) assets for families in each decile of the Social Security wealth distribution. Our projections show a substantial increase between 2000 and 2040 in the sum of these retirement assets in each wealth decile. We also consider the accumulation of 401(k) assets by families in different deciles of the distribution of lifetime earnings.

download in pdf format
   (281 K)

email paper

A non-technical summary of this paper is available in the March 2008 NBER Digest.  You can sign up to receive the NBER Digest by email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w13091

Published: The Rise of 401(k) Plans, Lifetime Earnings, and Wealth at Retirement, James M. Poterba, Steven F. Venti, David A. Wise. in Research Findings in the Economics of Aging, Wise. 2010

Users who downloaded this paper also downloaded* these:
Poterba, Rauh, Venti, and Wise w12597 Defined Contribution Plans, Defined Benefit Plans, and the Accumulation of Retirement Wealth
Poterba, Venti, and Wise w12834 The Decline of Defined Benefit Retirement Plans and Asset Flows
Poterba, Venti, and Wise w13381 The Changing Landscape of Pensions in the United States
Engen and Gale w8032 The Effects of 401(k) Plans on Household Wealth: Differences Across Earnings Groups
Poterba, Venti, and Wise w13083 New Estimates of the Future Path of 401(k) Assets
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us