Do Catch-Up Contributions Increase 401(k) Saving?
The brief’s key findings are:
- To encourage Americans to save more for retirement, some suggest raising 401(k) contribution limits.
- To assess such an option, this analysis estimates the effects of a 2001 increase in 401(k) limits that also introduced a higher “catch-up” limit for those 50 and over.
- The increase in the limits did boost contributions in 2002-05, but mostly for those near the prior limits, particularly those eligible to make catch-up contributions.
- Since few participants – only about 10 percent – are constrained by the limits, raising them does not offer a broad-based solution for low saving rates.