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Working Papers, No. 2022-40, September 2022 Crossref
Retirement Savings Adequacy in U.S. Defined Contribution Plans

We evaluate retirement savings adequacy using a large panel of U.S. workers with a 401(k) account. We model medical expenditures, longevity, investment risk, and the likelihood of withdrawals due to hardship, job separation, and reaching age 59 1/2. Based on their current account balances, income, saving, and investment behavior, three in four workers in our sample are not saving enough for retirement. The dispersion is related to plan features, account balances, but also worker saving behavior. A bequest motive, lower housing equity, higher risk aversion, lower discount rates or lower future returns worsen the shortfall. We examine various counterfactual policy interventions.

Working papers are not edited, and all opinions and errors are the responsibility of the author(s). The views expressed do not necessarily reflect the views of the Federal Reserve Bank of Chicago or the Federal Reserve System.


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