Buffer stock saving in retirement accounts |
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Authors: | David Love |
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Institution: | Willams College, Department of Economics, Williamstown, MA 01267, USA |
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Abstract: | We use a dynamic programming model to explore the possibility and extent of precautionary saving in tax-sheltered accounts such as the 401(k). The main policy experiment examines the behavior of saving for different levels of unemployment insurance (UI), which is a perfect substitute for precautionary saving against job loss. Our results indicate that increasing the generosity of UI crowds out 401(k) contributions made by younger workers, who save primarily for precautionary reasons. At the aggregate level, we find that 401(k)s increase national saving and that the magnitude of the effect depends on the generosity of UI. |
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Keywords: | D91 E21 E62 |
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