Retirement Savings Adequacy in U.S. Defined Contribution Plans

89 Pages Posted: 19 Dec 2018 Last revised: 6 Feb 2020

See all articles by Francisco Gomes

Francisco Gomes

London Business School

Kenton Hoyem

Financial Engines, Inc.

Wei-Yin Hu

Financial Engines, Inc.

Enrichetta Ravina

Federal Reserve Bank of Chicago; Center for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Date Written: February 4, 2020

Abstract

We evaluate retirement savings adequacy using a large panel of U.S. workers with a 401(k) account. We model medical expenditures, longevity, investment risk, and the likelihood of withdrawals due to hardship, job separation, and reaching age 59 1/2. Based on their current account balances, income, saving, and investment behavior, three in four workers in our sample are not saving enough for retirement. The dispersion is related to plan features, account balances, but also worker saving behavior. A bequest motive, lower housing equity, higher risk aversion, lower discount rates or lower future returns worsen the shortfall. We examine various counterfactual policy interventions.

Keywords: Retirement Savings; Household Finance; 401(k) Plans

JEL Classification: D14, D91, G11

Suggested Citation

Gomes, Francisco and Hoyem, Kenton and Hu, Wei-Yin and Ravina, Enrichetta, Retirement Savings Adequacy in U.S. Defined Contribution Plans (February 4, 2020). Available at SSRN: https://ssrn.com/abstract=3294422 or http://dx.doi.org/10.2139/ssrn.3294422

Francisco Gomes

London Business School ( email )

Finance Department
Sussex Place - Regent's Park
London NW1 4SA
United Kingdom

HOME PAGE: http://sites.google.com/view/francisco-gomes/home

Kenton Hoyem

Financial Engines, Inc. ( email )

1804 Embarcadero Road
Palo Alto, CA 94303
United States

Wei-Yin Hu

Financial Engines, Inc. ( email )

1050 Enterprise Way, 3rd Floor
Sunnyvale, CA 94089
United States

Enrichetta Ravina (Contact Author)

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

HOME PAGE: http://https://sites.google.com/view/eravina/research

Center for Economic Policy Research (CEPR) ( email )

33 Great Sutton Street
London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
Brussels
Belgium

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
305
Abstract Views
2,716
rank
126,043
PlumX Metrics