Research report The Interaction Between IRAs and 401(k) Plans in Savers’ Portfolios
William G. Gale, Aaron Krupkin, Shanthi Ramnath
Display Date
File
File
Download Report
(380.78 KB)

Policy makers have long sought to boost households’ retirement saving through tax incentives. Little is known, however, about how savers’ contributions are linked across different types of tax-preferred accounts. Previous research has concluded that workers who become eligible for a 401(k) plan also see stronger growth in IRA balances. However, the mechanism for this increase – contributions, asset growth, rollovers, etc. – is a puzzle. To examine these issues further, we use a sample of tax returns from 1999-2014. A particularly useful feature of the data is the presence of tax-reported information on IRA balances and 401(k) contributions. Using two different control groups that have stronger and weaker tastes for saving, respectively, than the treatment group, we find virtually no link between new 401(k) contributions and new IRA contributions. Households who start contributing to 401(k) plans do not have higher propensities to start contributing to IRAs, raise IRA contributions, own IRAs, or have higher IRA balances in level or first-differences.
Primary topic Individual Taxes
Research Area Individual Taxes