The Effects of 401(K) Plans on Household Wealth: Differences Across Earnings Groups

56 Pages Posted: 12 Oct 2000

See all articles by Eric M. Engen

Eric M. Engen

Federal Reserve Board

William G. Gale

Brookings Institution

Multiple version iconThere are 2 versions of this paper

Date Written: August 2000


This paper provides a new econometric specification and new evidence on the impact of 401(k) plans on household wealth. We allow the impact of 401(k)s to vary over both time and earnings groups. Our specification - motivated by a variety of theoretical considerations and data patterns - generalizes earlier work in the literature, and we show that the modeling constraints imposed by previous authors are rejected by the data. Using data from 1987 and 1991 from the Survey of Income and Program Participation, we find that the effects of 401(k)s on household wealth vary significantly by earnings level. Our analysis implies that 401(k)s held by groups with low earnings, who hold a small portion of 401(k) balances, are more likely to represent additions to net wealth than 401(k)s held by high-earning groups, who hold the bulk of 401(k) assets. Thus, between 0 and 30 percent of 401(k) balances represent net additions to private saving.

Note: Mathematical operators are not available on screen, but they are available when you print the document.

JEL Classification: D12, H24, H31

Suggested Citation

Engen, Eric M. and Gale, William G., The Effects of 401(K) Plans on Household Wealth: Differences Across Earnings Groups (August 2000). Available at SSRN: or

Eric M. Engen

Federal Reserve Board ( email )

20th St. and Constitution Ave., NW
Washington, DC 20551
United States

William G. Gale (Contact Author)

Brookings Institution ( email )

1775 Massachusetts Avenue, NW
Washington, DC 20036
United States
202-797-6148 (Phone)
202-797-6181 (Fax)

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics

Under construction: SSRN citations while be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information