Life-cycle saving, limits on contributions to DC pension plans, and lifetime tax benefits
Laurence Kotlikoff () and
Mark J. Warshawsky
No 102, Working Papers (Old Series) from Federal Reserve Bank of Cleveland
This paper analyzes questions related to defined contribution (DC) plans. For what types of households are statutory contribution limits likely to bind? How large is the lifetime tax benefit from participating in a DC plan and how does it vary with lifetime income? The authors find that contribution limits bind for households that begin their plan participation late in life or wish to retire early, single-earner households, those who are not borrowing-constrained, those with rapid rates of real wage growth, and those with high levels of earnings regardless of age. Setting contribution rates at the average maximum level allowed by employers and assuming a 4% real return on assets, the lifetime benefit rises from 2% of lifetime consumption for households earning $25,000 per year, to 9.8% for those earning $300,000 per year. Contribution ceilings limit the benefit for high earners and are sensitive to the assumed rate of return.
Keywords: Saving and investment; Retirement (search for similar items in EconPapers)
Date: 2001, Revised 2001
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
https://www.clevelandfed.org/~/media/content/newsr ... ions%20pdf.pdf?la=en Full text (application/pdf)
Working Paper: Life-Cycle Saving, Limits on Contributions to DC Pension Plans, and Lifetime Tax Benefits (2001)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:0102
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Working Papers (Old Series) from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by ().