Participation and Contributions in Tax-deferred Retirement Accounts: Evidence from Social Security Records

Published: 2010


Social Security Administration W-2 records contain employee annual tax-deferred contributions for 1990-2003 and sufficient information to calculate tax-deferred contributions for 1984-1989. We use this information to compare tax-deferred contribution profiles of three cohorts of respondents in the Health and Retirement Study to determine whether younger cohorts saved relatively more at the same stage of the life cycle than had older cohorts. We find that participation in tax-deferred retirement plans increased substantially for all cohorts from 1984 to 2003, and that respondents in more recent cohorts were more likely to participate in such plans than respondents of the same ages in the earliest cohort. Their contributions as a percent of earnings were not significantly larger than those of the earliest cohort, however. Despite the increased availability of these employer-provided plans throughout this period, participation rates and contribution amounts remained low among respondents in the lower half of the earnings distribution.

Key Findings

    • Participation in tax-deferred retirement plans increased substantially from 1984 to 2003 for for participants in the Health and Retirement Study.
    • Contributions relative to earnings were nearly identical (5.5 percent) among three cohorts over this period.
    • Those with earnings under than the median contributed less than $2,000 a year, while those in the highest income quartile tripled contributions from $2,000 to $6,000.
    • Early Baby Boomers contributed less than their peers in the War Babies cohort, but more than their peers in the original HRS cohort.