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Do "Catch-Up Limits" Raise Retirement Saving? Evidence from a Regression Discontinuity Design

Adam Lavecchia ()

National Tax Journal, 2018, vol. 71, issue 1, 121-154

Abstract: This paper studies the effect of raising contribution limits on retirement saving by exploiting the "catch-up limit" provision, a rule which allows those over the age of 50 to make higher IRA and 401(k) contributions than those under 50. Using an age-related regression discontinuity design, I find that eligibility for catch-up limits leads to a large increase in total tax-deferred contributions for those without access to a 401(k) plan. This is driven by a 25 percent increase in average IRA contributions and a 21 percent increase in the likelihood of making an IRA contribution. I also find no significant effects on overall 401(k) contributions. The findings suggest that, contrary to the neoclassical life-cycle model, the response to eligibility for catch-up limits was not limited to constrained savers.

Date: 2018
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Handle: RePEc:ntj:journl:v:71:y:2018:i:1:p:121-154