TY - JOUR
T1 - Earnings volatility and 401(k) contributions
AU - Ghilarducci, Teresa
AU - Saad-Lessler, Joelle
AU - Reznik, Gayle
N1 - Publisher Copyright:
© Copyright Cambridge University Press 2017.
PY - 2018/10/1
Y1 - 2018/10/1
N2 - Using longitudinal Survey of Income and Program Participation data linked to Social Security Administration administrative records from 2009 and 2012, we find negative economic shocks cause 401(k) contribution behavior to react in ways consistent with reactions to fear and past trauma. If employees participating in 401(k) plans did not experience real earnings declines or unemployment spells between 2009 and 2012, then their contribution rates would have been 5% higher and each person would have contributed US $193 more toward their defined contribution plan accounts. We conclude that previous studies may have swung too far in emphasizing inertia as a primary behavior trait explaining workers' 401(k) plan engagement. Reactive behavior to protect living standards by reducing retirement savings is also important.
AB - Using longitudinal Survey of Income and Program Participation data linked to Social Security Administration administrative records from 2009 and 2012, we find negative economic shocks cause 401(k) contribution behavior to react in ways consistent with reactions to fear and past trauma. If employees participating in 401(k) plans did not experience real earnings declines or unemployment spells between 2009 and 2012, then their contribution rates would have been 5% higher and each person would have contributed US $193 more toward their defined contribution plan accounts. We conclude that previous studies may have swung too far in emphasizing inertia as a primary behavior trait explaining workers' 401(k) plan engagement. Reactive behavior to protect living standards by reducing retirement savings is also important.
KW - 401(k) plans
KW - Non-wage compensation
KW - Private pensions
KW - Retirement savings
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U2 - 10.1017/S1474747217000178
DO - 10.1017/S1474747217000178
M3 - Review article
AN - SCOPUS:85018683497
SN - 1474-7472
VL - 17
SP - 554
EP - 575
JO - Journal of Pension Economics and Finance
JF - Journal of Pension Economics and Finance
IS - 4
ER -