The Rise of 401(k) Plans, Lifetime Earnings, and Wealth at Retirement

James M. Poterba, Steven F. Venti and David A. Wise

in Research Findings in the Economics of Aging

Published by University of Chicago Press

Published in print April 2010 | ISBN: 9780226903064
Published online February 2013 | e-ISBN: 9780226903088 | DOI:
The Rise of 401(k) Plans, Lifetime Earnings, and Wealth at Retirement

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This chapter looks at how Social Security, 401(k) participation, and other asset accumulation fit together for households with different lifetime earnings and different Social Security wealth accumulations. Two broad categories of wealth are focused upon: dedicated retirement assets, which are made up of Social Security wealth, accrued benefits in traditional pension plans, 401(k) savings, and IRAs and Keogh plans; and undedicated assets, including nonretirement financial savings and housing equity. 401(k) participation varies substantially by income, broader measures of retirement assets show a “retirement replacement rate” (inclusive of both Social Security and retirement saving) and a “total saving rate” (including both dedicated and undedicated assets) that varies only moderately by lifetime earnings and by Social Security wealth. Combining projections of 401(k) assets with estimated Social Security wealth, the study finds that the combined rate of growth is surprisingly similar across earnings deciles, and translates to at least a doubling of retirement resources in most earnings and Social Security wealth deciles. The growth rate is lower in the bottom two deciles of lifetime earnings. These various results are indicative of a very dramatic shift in the landscape of financial resources available to retirees in the future.

Keywords: retirement; lifetime earnings; 401(k) plans; social security; assets

Chapter.  15029 words.  Illustrated.

Subjects: Economics

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