IDEAS home Printed from https://ideas.repec.org/p/crr/jusfac/jtf_12.html
   My bibliography  Save this paper

Changing 401(k) Defaults on Cashing Out: Another Step in the Right Direction

Author

Listed:
  • Alicia H. Munnell

    (Center for Retirement Research at Boston College)

  • Jamie Lee

    (Center for Retirement Research at Boston College)

Abstract

Over the last 20 years, pension coverage has shifted from defined benefit plans, where benefits are based on years of service and final salary and generally paid as an annuity, to 401(k) plans, where individual and employer contributions and earnings on those contributions are awarded as a lump sum at retirement. Although the majority of workers lucky enough to have a pension will rely on a 401(k) plan, these plans are coming up short. The main reason is that 401(k) plans shift all the risks and decision-making from the employer to the individual, and individuals make mistakes all along the way. One of the most serious mistakes occurs when young people cash out small pension accounts upon changing jobs. The regulation issued today from the U.S. Department of Labor with regard to provisions in the 2001 Economic Growth and Tax Relief Reconciliation Act should help solve the “cash out” problem.

Suggested Citation

  • Alicia H. Munnell & Jamie Lee, 2004. "Changing 401(k) Defaults on Cashing Out: Another Step in the Right Direction," Just the Facts jtf_12, Center for Retirement Research.
    • Handle: RePEc:crr:jusfac:jtf_12
    as

    Download full text from publisher

    File URL: http://crr.bc.edu/briefs/changing-401k-defaults-on-cashing-out-another-step-in-the-right-direction/
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Burman, Leonard E. & Coe, Norma B. & Dworsky, Michael & Gale, William G., 2012. "Effects of Public Policies on the Disposition of Pre-Retirement Lump-Sum Distributions: Rational and Behavioral Influences," National Tax Journal, National Tax Association;National Tax Journal, vol. 65(4), pages 863-887, December.

    More about this item

    Keywords

    pensions; 401(k); shift;
    All these keywords.

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:crr:jusfac:jtf_12. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Amy Grzybowski or Christopher F Baum (email available below). General contact details of provider: https://edirc.repec.org/data/crrbcus.html .

    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.