Nature or Nurture: Why Do 401(K) Participants Save Differently than Other Workers?

27 Pages Posted: 21 Sep 2002  

Karen M. Pence

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: July 2002

Abstract

Participants in 401(k) plans are more likely than other workers to list "retirement" as their main reason for saving, to hold individual retirement accounts and to invest in the stock market. There are two possible reasons for these differences: (1) workers who like to save choose to participate in the program; or (2) 401(k) participation educates workers about investing. I disentangle these explanations using the 1983-1989 Survey of Consumer Finances. I find that 401(k) participants have a greater interest in saving for retirement than other workers, suggesting that extrapolating from their saving behavior to that of the workforce at large could be misleading. 401(k) participation also appears to increase awareness of retirement saving, but the gains are largest among workers who already prioritize retirement saving.

Keywords: 401(k), social security, financial education, saving

JEL Classification: H31, H55, E21

Suggested Citation

Pence, Karen M., Nature or Nurture: Why Do 401(K) Participants Save Differently than Other Workers? (July 2002). FEDS Working Paper No. 2002-32. Available at SSRN: https://ssrn.com/abstract=325324 or http://dx.doi.org/10.2139/ssrn.325324

Karen M. Pence (Contact Author)

Board of Governors of the Federal Reserve System ( email )

Washington, DC 20551
United States
202-452-2342 (Phone)
202-728-5887 (Fax)

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