Research Report 401(k) Investment Decisions and Social Security Reform
Cori E. Uccello
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This paper uses the 1995 Survey of Consumer Finances to show that 401(k) participants with an underlying defined benefit plan are more likely to invest in equities than are participants whose 401(k) is their primary plan, suggesting that workers with a guaranteed source of retirement income are more likely to invest their other retirement assets more aggressively. Removing this guarantee might result in more conservative investment. Therefore, using current 401(k) asset allocation behavior to project income under a Social Security individual account system with reduced guaranteed benefits could overstate returns to these accounts, thus overstating their attractiveness relative to the current system.
Research Areas Aging and retirement Taxes and budgets
Tags Social Security Pensions Individual taxes Federal budget and economy Retirement policy
Policy Centers Income and Benefits Policy Center