Determinants of Saving in 401(k) Plans

National Bureau Of Economic Research, Cambridge MA

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Abstract

[unreadable] DESCRIPTION (provided by applicant): We have built a database that records the savings and investment decisions of individual employees who have access to employer-sponsored 40 l(k) plans. Our database contains repeated annual cross-sectional observations on over 1 million employees at 28 large corporations. For eight of these firms, we also have detailed longitudinal data on every saving and asset allocation transaction conducted by individual employees at these firms--approximately 170 million transactions over the past nine years. Using these data, we plan to undertake a wide range of studies that analyze the determinants of individuals' 401(k) savings and investment choices. Our studies consider the impact of economic incentives like employer matching and of psychological factors like the framing of saving and investment choices, the impact of defaults, and the causes of procrastination. Our research also evaluates the effect of institutions that force employees to think about their retirement saving decisions. We examine a wide range of 401(k) outcomes, including participation, savings rates, trading frequency, asset allocation, loans, and cash distributions. Most of our research identifies the effect of institutional regimes by comparing participant behavior at a firm before and after a rule change in the 401(k) plan. Our research will identify the determinants of saving and asset allocation choices in 401(k) plans and may be relevant for related retirement savings plans, like individual Social Security accounts.