Tuesday, July 7, 2015

New issue brief: “Do Catch-Up Contributions Increase 401(k) Saving?”

The Center for Retirement Research at Boston College has released a new Issue in Brief:

“Do Catch-Up Contributions Increase 401(k) Saving?”
by Qi Guan, Matthew S. Rutledge, April Yanyuan Wu, and Francis M. Vitagliano

The brief’s key findings are:
  • To encourage Americans to save more for retirement, some suggest raising 401(k) contribution limits. 
  • To assess such an option, this analysis estimates the effects of a 2001 increase in 401(k) limits that also introduced a higher “catch-up” limit for those 50 and over.
  • The increase in the limits did boost contributions in 2002-05, but only for those near the prior limits, particularly those eligible to make catch-up contributions.
  • Since few participants – only about 10 percent – are constrained by the limits, raising them does not offer a broad-based solution for low saving rates.
This brief is available here.



1 comment:

JoeTheEconomist said...

Andrew,

Insurance is a better way to manage the cost of the unknown. It is frightening to see what politicians suggest. They either don't understand the problem or don't care about the consequences.

www.fedsmith.com/2014/05/27/going-in-the-wrong-direction/

The problem is that the private annuity market is too expensive for the average citizen.