Catching Up or Crowding Out? The Crowd-Out Effects of Catch-Up Retirement Contributions on Non-Retirement Saving

Abstract

Using tax data, this paper exploits a discontinuous increase in retirement contribution limits based on exact date of birth. This paper finds clear evidence that constrained individuals increase their retirement saving when so eligible, but finds no evidence suggesting that non-retirement saving falls. In the baseline specifications, one can rule out crowd-out greater than approximately 0.38 to 0.57 at the 95 percent confidence level depending on the measure used. This suggests that the additional contributions induced by catch-up eligibility represent an increase in total private saving.

Keywords: Retirement, crowd-out, regression discontinuity, catch-up, 401(k)

JEL Classification: D14, D15, H24