How Do Contribution Limits Affect Contributions to Tax-Preferred Savings Accounts?

Kevin Milligan

Social and Economic Dimensions of an Aging Population Research Papers from McMaster University

Abstract: Contributions to tax-preferred savings accounts are typically constrained by a contribution limit. These limits influence contributions not just in periods in which they bind, but in other periods as well. I develop a simple life-cycle model in which consumers exhibit "use-it-or-lose-it" contribution behaviour. This connects current contributions to future contribution limits, which leads to the result that an increase in contribution limits can decrease contributions. Empirical evidence provides support for the model--larger future contribution room is associated with smaller contributions.

Keywords: income tax; saving (search for similar items in EconPapers)
JEL-codes: H24 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2000-08
New Economics Papers: this item is included in nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: How do contribution limits affect contributions to tax-preferred savings accounts? (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:mcm:sedapp:27

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