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- Title
The Persistence of Employee 401(k) Contributions Over a Major Stock Market Cycle: The Limited Power of Inertia.
- Authors
Muller, Leslie A.; Turner, John A.
- Abstract
Results from behavioral economics suggest that inertia would cause workers who began contributing to their 401(k) plans to continue doing so, as long as they remained with the same employer, and microsimulation models projecting final retirement wealth often assume persistency of workers' 401(k) contributions. The authors' original research presented in this article investigates an aspect of the issue of persistency of contributions, and their results challenge assumptions of inertia and persistency. Results show a positive, statistically significant effect of market volatility on 401(k) participation over time. They also find a low density and low persistence in contributions over a fairly short period of time and that inertia is not a driving force behind contribution decisions.
- Subjects
401(K) plans; BEHAVIORAL economics; MARKET volatility; DEFERRED compensation; STOCK exchanges; BUSINESS cycles
- Publication
Benefits Quarterly, 2013, Vol 29, Issue 3, p51
- ISSN
8756-1263
- Publication type
Article