IRAs and Household Saving

28 Pages Posted: 4 Feb 2011

See all articles by William G. Gale

William G. Gale

Brookings Institution

John Karl Scholz

University of Wisconsin - Madison - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: 1994


This paper examines the effects of Individual Retirement Accounts (IRAs) on private and national saving. We construct a formal model of dynamic utility maximization that generates closed-form equations for IRA and other saving. Our empirical estimates indicate that raising the annual IRA contribution limit between 1983 and 1986 would have resulted in little, if any, increase in national saving. Results from sensitivity analysis imply substantially smaller effects on national saving than most previous researchers have estimated. Our results are consistent with new evidence we present indicating considerable potential among IRA holders to shift taxable forms of saving into IRAs.

Keywords: national saving, IRAs, private saving

JEL Classification: H20, D12

Suggested Citation

Gale, William G. and Scholz, John Karl, IRAs and Household Saving (1994). American Economic Review, Vol. 84, No. 5, 1994, Available at SSRN:

William G. Gale (Contact Author)

Brookings Institution ( email )

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John Karl Scholz

University of Wisconsin - Madison - Department of Economics ( email )

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