IDEAS home Printed from https://ideas.repec.org/a/bla/rmgtin/v20y2017i1p7-35.html
   My bibliography  Save this article

The Influence of Plan Demographics on Contribution Behavior of 401(k) Participants

Author

Listed:
  • Youngkyun Park

Abstract

This article examines the influence of plan demographics, which is defined as the salary and tenure composition of a plan, on contribution behavior of 401(k) participants. Results using a large sample of 401(k) plans show that plan demographics influence participant contribution rates directly or through interaction with individual demographic characteristics. A participant's contribution rate can be varied by 1.6–3.0 percentage points for each age between 25 and 64, depending on what plan demographics she is exposed to. In addition, for the decision to contribute the maximum allowed amount, plan demographics significantly interact with individual demographic characteristics.

Suggested Citation

  • Youngkyun Park, 2017. "The Influence of Plan Demographics on Contribution Behavior of 401(k) Participants," Risk Management and Insurance Review, American Risk and Insurance Association, vol. 20(1), pages 7-35, March.
    • Handle: RePEc:bla:rmgtin:v:20:y:2017:i:1:p:7-35
    DOI: 10.1111/rmir.12069
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/rmir.12069
    Download Restriction: no
    File URL: https://libkey.io/10.1111/rmir.12069?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Richard H. Thaler & Shlomo Benartzi, 2004. "Save More Tomorrow (TM): Using Behavioral Economics to Increase Employee Saving," Journal of Political Economy, University of Chicago Press, vol. 112(S1), pages 164-187, February.
    2. Mauricio Soto & Barbara A. Butrica, 2009. "Will Automatic Enrollment Reduce Employer Contributions to 401(k) Plans?," Working Papers, Center for Retirement Research at Boston College wp2009-33, Center for Retirement Research, revised Dec 2009.
    3. Reis, Ricardo, 2006. "Inattentive consumers," Journal of Monetary Economics, Elsevier, vol. 53(8), pages 1761-1800, November.
    4. Zoran Ivkovi & Scott Weisbenner, 2007. "Information Diffusion Effects in Individual Investors' Common Stock Purchases: Covet Thy Neighbors' Investment Choices," The Review of Financial Studies, Society for Financial Studies, vol. 20(4), pages 1327-1357.
    5. Lusardi, Annamaria & Mitchell, Olivia S., 2011. "Financial literacy and retirement planning in the United States," Journal of Pension Economics and Finance, Cambridge University Press, vol. 10(4), pages 509-525, October.
    6. John Ameriks & Andrew Caplin & John Leahy, 2003. "Wealth Accumulation and the Propensity to Plan," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 1007-1047.
    7. Kenneth R. Ahern & Ran Duchin & Tyler Shumway, 2014. "Peer Effects in Risk Aversion and Trust," The Review of Financial Studies, Society for Financial Studies, vol. 27(11), pages 3213-3240.
    8. Lusardi, Annamaria & Mitchell, Olivia S., 2007. "Baby Boomer retirement security: The roles of planning, financial literacy, and housing wealth," Journal of Monetary Economics, Elsevier, vol. 54(1), pages 205-224, January.
    9. John Beshears & James J. Choi & David Laibson & Brigitte C. Madrian, 2010. "The Impact of Employer Matching on Savings Plan Participation under Automatic Enrollment," NBER Chapters, in: Research Findings in the Economics of Aging, pages 311-327, National Bureau of Economic Research, Inc.
    10. Harrison Hong & Jeffrey D. Kubik & Jeremy C. Stein, 2001. "Social Interaction and Stock-Market Participation," NBER Working Papers 8358, National Bureau of Economic Research, Inc.
    11. Kaustia, Markku & Knüpfer, Samuli, 2012. "Peer performance and stock market entry," Journal of Financial Economics, Elsevier, vol. 104(2), pages 321-338.
    12. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 115-136, Summer.
    13. Gabriel D. Carroll & James J. Choi & David Laibson & Brigitte C. Madrian & Andrew Metrick, 2009. "Optimal Defaults and Active Decisions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1639-1674.
    14. Smith, Karen E. & Johnson, Richard W. & Muller, Leslie A., 2004. "Deferring Income in Employer–Sponsored Retirement Plans: The Dynamics of Participant Contributions," National Tax Journal, National Tax Association;National Tax Journal, vol. 57(3), pages 639-670, September.
    15. Huberman, Gur, 2001. "Familiarity Breeds Investment," The Review of Financial Studies, Society for Financial Studies, vol. 14(3), pages 659-680.
    16. Alan T. Sorensen, 2006. "Social learning and health plan choice," RAND Journal of Economics, RAND Corporation, vol. 37(4), pages 929-945, December.
    17. Duflo, Esther & Saez, Emmanuel, 2002. "Participation and investment decisions in a retirement plan: the influence of colleagues' choices," Journal of Public Economics, Elsevier, vol. 85(1), pages 121-148, July.
    18. Mitchell, Olivia S. & Utkus, Stephen P. & Yang, Tongxuan (Stella), 2007. "Turning Workers Into Savers? Incentives, Liquidity, and Choice in 401(K) Plan Design," National Tax Journal, National Tax Association;National Tax Journal, vol. 60(3), pages 469-489, September.
    19. Nicole Votolato Montgomery & Lisa R. Szykman & Julie R. Agnew, 2012. "How Can Employers Encourage Young Workers to Save for Retirement?," Issues in Brief ib2012-7, Center for Retirement Research, revised Mar 2012.
    20. Shive, Sophie, 2010. "An Epidemic Model of Investor Behavior," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 45(1), pages 169-198, February.
    21. Gur Huberman & Sheena Iyengar & Wei Jiang, 2007. "Defined Contribution Pension Plans: Determinants of Participation and Contributions Rates," Journal of Financial Services Research, Springer;Western Finance Association, vol. 31(1), pages 1-32, February.
    22. Charles F. Manski, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(3), pages 531-542.
    23. Alan T. Sorensen, 2006. "Social learning and health plan choice," RAND Journal of Economics, The RAND Corporation, vol. 37(4), pages 929-945, December.
    24. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
    25. Cunningham, Christopher R. & Engelhardt, Gary V., 2002. "Federal Tax Policy, Employer Matching, and 401(K) Saving: Evidence From HRS W-2 Records," National Tax Journal, National Tax Association;National Tax Journal, vol. 55(3), pages 617-645, September.
    26. Hvide, Hans K. & Östberg, Per, 2015. "Social interaction at work," Journal of Financial Economics, Elsevier, vol. 117(3), pages 628-652.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Anastasia Girshina & Thomas Y. Mathä & Michael Ziegelmeyer, 2019. "Peer effects in stock market participation: Evidence from immigration," BCL working papers 137, Central Bank of Luxembourg.
    2. Park, Youngkyun & Banerjee, Sudipto, 2020. "Coworker influence on annuitization decisions: Evidence from defined benefit plans," Journal of Economic Behavior & Organization, Elsevier, vol. 178(C), pages 582-606.
    3. Hellström, Jörgen & Stålnacke, Oscar & Olsson, Rickard, 2022. "Individuals’ financial risk-taking and peer influence," The Quarterly Review of Economics and Finance, Elsevier, vol. 86(C), pages 1-17.
    4. Francisco Gomes & Michael Haliassos & Tarun Ramadorai, 2021. "Household Finance," Journal of Economic Literature, American Economic Association, vol. 59(3), pages 919-1000, September.
    5. Cardella, Eric & Kalenkoski, Charlene M. & Parent, Michael, 2018. "Less Is Not More: Information Presentation Complexity and 401(k) Planning Choices," IZA Discussion Papers 11538, Institute of Labor Economics (IZA).
    6. Kaustia, Markku & Knüpfer, Samuli, 2012. "Peer performance and stock market entry," Journal of Financial Economics, Elsevier, vol. 104(2), pages 321-338.
    7. Samuli Knüpfer & Elias Rantapuska & Matti Sarvimäki, 2023. "Social Interaction in the Family: Evidence from Investors’ Security Holdings," Review of Finance, European Finance Association, vol. 27(4), pages 1297-1327.
    8. Marie-Eve Lachance, 2014. "Financial Literacy and Neighborhood Effects," Journal of Consumer Affairs, Wiley Blackwell, vol. 48(2), pages 251-273, June.
    9. Kiichi Tokuoka, 2017. "Is stock investment contagious among siblings?," Empirical Economics, Springer, vol. 52(4), pages 1505-1528, June.
    10. Mitchell, O.S. & Piggott, J., 2016. "Workplace-Linked Pensions for an Aging Demographic," Handbook of the Economics of Population Aging, in: Piggott, John & Woodland, Alan (ed.), Handbook of the Economics of Population Aging, edition 1, volume 1, chapter 0, pages 865-904, Elsevier.
    11. Mugerman, Yevgeny & Sade, Orly & Shayo, Moses, 2014. "Long term savings decisions: Financial reform, peer effects and ethnicity," Journal of Economic Behavior & Organization, Elsevier, vol. 106(C), pages 235-253.
    12. Leonardo Bursztyn & Florian Ederer & Bruno Ferman & Noam Yuchtman, 2012. "Understanding Peer Effects in Financial Decisions: Evidence from a Field Experiment," NBER Working Papers 18241, National Bureau of Economic Research, Inc.
    13. Duraj, Kamila & Grunow, Daniela & Chaliasos, Michael & Laudenbach, Christine & Siegel, Stephan, 2024. "Rethinking the stock market participation puzzle: A qualitative approach," IMFS Working Paper Series 210, Goethe University Frankfurt, Institute for Monetary and Financial Stability (IMFS).
    14. Leonardo Bursztyn & Florian Ederer & Bruno Ferman & Noam Yuchtman, 2014. "Understanding Mechanisms Underlying Peer Effects: Evidence From a Field Experiment on Financial Decisions," Econometrica, Econometric Society, vol. 82(4), pages 1273-1301, July.
    15. Hirshleifer, David & Teoh, Siew Hong, 2008. "Thought and Behavior Contagion in Capital Markets," MPRA Paper 9164, University Library of Munich, Germany.
    16. Hyunjee Kim & Edward C. Norton, 2015. "Practice Patterns among Entrants and Incumbents in the Home Health Market after the Prospective Payment System was Implemented," Health Economics, John Wiley & Sons, Ltd., vol. 24(S1), pages 118-131, March.
    17. Liu, Hong & Sun, Qi & Zhao, Zhong, 2014. "Social learning and health insurance enrollment: Evidence from China's New Cooperative Medical Scheme," Journal of Economic Behavior & Organization, Elsevier, vol. 97(C), pages 84-102.
    18. Nikolaos Mylonidis & Lefkothea-Georgia Oikonomou, 2021. "Tracing the impact of peers on households’ economic behavior," Economic Change and Restructuring, Springer, vol. 54(3), pages 655-681, August.
    19. Knüpfer, Samuli & Rantapuska, Elias & Sarvimäki, Matti, 2017. "Why does portfolio choice correlate across generations?," Bank of Finland Research Discussion Papers 25/2017, Bank of Finland.
    20. Lu, Timothy (Jun) & Tang, Ning, 2019. "Social interactions in asset allocation decisions: Evidence from 401(k) pension plan investors," Journal of Economic Behavior & Organization, Elsevier, vol. 159(C), pages 1-14.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:rmgtin:v:20:y:2017:i:1:p:7-35. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1098-1616 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.