Study: Plan Design, Demographics Affect Contributions To 401(k) Plans
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One particular finding leapt out at Sarah Holden when examining data collected for "Contribution Behavior of 401(k) Plan Participants."
The senior economist with Washington-based Investment Company Institute was surprised to learn after looking at the 1999 401(k) contribution behavior of 1.7 million people that in significant numbers, older people tend to contribute more than their younger counterparts.
Holden, who co-authored the report with Jack VanDerhei, a Fellow with Employee Benefits Research Institute, a nonpartisan public policy research organization based in Washington, says there are two widely accepted theories on this phenomenon.
One is that people go through spending and saving cycles. In their younger years, they tend to spend on children and setting up a household, she says. When that cycle is over, they use the money for retirement savings.
"Also people don't think about retirement when they're really young," Holden says. "They think about it more when it gets closer."
Holden says this is the first time she undertook studying the 401(k) contribution habits of such a large cross-section of the population.
"Our agenda was to analyze and try to understand the factors that influence an individual's contribution behavior," she says.
The study finds that contribution rates vary widely according to demographics, plan design and contribution limits set by tax laws, Holden says.
