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Do Low-Income Workers Benefit from 401(k) Plans?

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  • Eric Toder
  • Karen E. Smith

Abstract

Economists frequently assume that employees "pay for" employer-provided fringe benefits, such as contributions to retirement plans, in the form of reduced wages. Because low-income employees receive little tax benefit from saving in qualified retirement plans, however, and may prefer immediate consumption to additional retirement accruals, they may not be willing to accept a one dollar reduction in their wage in return for an additional dollar contributed to their 401(k) plan, while high income workes may be willing to give up more than a dollar in wages to get the tax benefit.

Suggested Citation

  • Eric Toder & Karen E. Smith, 2011. "Do Low-Income Workers Benefit from 401(k) Plans?," Working Papers, Center for Retirement Research at Boston College wp2011-14, Center for Retirement Research, revised Sep 2011.
    • Handle: RePEc:crr:crrwps:wp2011-14
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