Employer Matching and 401(k) Saving: Evidence from the Health and Retirement Study

Gary V. Engelhardt and Anil Kumar

No 12447, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Employer matching of employee 401(k) contributions can provide a powerful incentive to save for retirement and is a key component in pension-plan design in the United States. Using detailed administrative contribution, earnings, and pension-plan data from the Health and Retirement Study, this analysis formulates a life-cycle-consistent econometric specification of 401(k) saving and estimates the determinants of saving accounting for non-linearities in the household budget set induced by matching. The participation estimates indicate that an increase in the match rate by 25 cents per dollar of employee contribution raises 401(k) participation by 3.75 to 6 percentage points, and the estimated elasticity of participation with respect to matching ranges from 0.02-0.07. The parametric and semi-parametric estimates for saving indicate that an increase in the match rate by 25 cents per dollar of employee contribution raises 401(k) saving by $400-$700 (in 1991 dollars). The estimated elasticity of 401(k) saving to matching is also small and ranges from 0.09-0.12 overall, with just under half of this effect on the intensive margin. Overall, the analysis reveals that matching is a rather poor policy instrument with which to raise retirement saving.

JEL-codes: E21 H24 J32 (search for similar items in EconPapers)
Date: 2006-08
New Economics Papers: this item is included in nep-mac and nep-pbe
Note: PE
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published as Engelhardt, Gary V. & Kumar, Anil, 2007. "Employer matching and 401(k) saving: Evidence from the health and retirement study," Journal of Public Economics, Elsevier, vol. 91(10), pages 1920-1943, November.
Published as Employer Matching and 401(k) Saving: Evidence from the Health and Retirement Study , Gary V. Engelhardt, Anil Kumar. in Public Policy and Retirement, Trans-Atlantic Public Economics Seminar (TAPES) , Blomquist and Gordon. 2007

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Chapter: Employer Matching and 401(k) Saving: Evidence from the Health and Retirement Study (2007)
Journal Article: Employer matching and 401(k) saving: Evidence from the health and retirement study (2007)
Working Paper: Employer Matching and 401(k) Saving: Evidence from the Health and Retirement Study (2004)
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