Implications of Rising Personal Retirement Saving

48 Pages Posted: 7 Sep 2000 Last revised: 7 Oct 2010

See all articles by James M. Poterba

James M. Poterba

National Bureau of Economic Research (NBER); Massachusetts Institute of Technology (MIT) - Department of Economics

Steven F. Venti

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

David A. Wise

National Bureau of Economic Research (NBER); Harvard University - Harvard Kennedy School (HKS)

Date Written: March 1999

Abstract

Retirement saving accounts, particularly employer-provided 401(k) plans rapidly in the last decade. More than forty percent of workers are currently eligible for these" plans, and over seventy percent of eligibles participate in these plans. The substantial and" ongoing accumulation of assets in these plans has the potential to significantly alter the financial" preparations for retirement by future retirees. This paper uses data on current age-specific" patterns of 401(k) participation, in conjunction with Social Security earnings records that provide" detailed information on age-earnings profiles over the lifetime, to project the 401(k) balances of" future retirees. The results, which are illustrated by reference to individuals who were 27 and 37" in 1996, demonstrate the growing importance of 401(k) saving. The projected mean 401(k)" balance at retirement for a current 37 year old is $91,600, assuming that the 401(k) plan assets" are invested half in stocks and half in bonds. For a current 27 year old $125,000. These results support the growing importance of personal saving through retirement" saving accounts in contributing to financial well-being in old age.

Suggested Citation

Poterba, James M. and Venti, Steven F. and Wise, David A., Implications of Rising Personal Retirement Saving (March 1999). NBER Working Paper No. w6295. Available at SSRN: https://ssrn.com/abstract=226052

James M. Poterba (Contact Author)

National Bureau of Economic Research (NBER) ( email )

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Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Steven F. Venti

Dartmouth College - Department of Economics ( email )

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603-646-2526 (Phone)
603-646-2122 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

David A. Wise

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Harvard University - Harvard Kennedy School (HKS)

79 John F. Kennedy Street
Cambridge, MA 02138
United States

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