Taxpayers' responses to tax-based incentives for retirement savings: Evidence from the Saver's Credit notch

Ramnath, Shanthi

doi:10.1016/j.jpubeco.2013.02.010

Cited by 39 publications

(34 citation statements)

References 19 publications

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“…A second type of studies in this literature focuses on discontinuous jumps or notches in the budget constraint, which create stronger distortions and should therefore induce larger behavioral responses. The typical behavioral pattern found in these studies is a sharp change in behavior at the notch, resulting from bunching before the price increase and holes in the distribution after the price change (Brown 2013, Ramnath 2013, Kleven and Waseem 2013, Almunia and Lopez-Rodriguez 2012, Marx 2012, and Seim 2012. These patterns correspond very well to our findings on behavioral responses of retirement entry to severance pay discontinuities.…”

Section: Relationship To the Literature On Bunching Estimation Technimentioning

confidence: 75%

“…Section 3 presents nonparametric graphical analyses of retirement frequencies and severance payments by years of tenure at retirement. Section 4 defines 3 For examples in the income tax literature, see Saez (2010), Kleven and Waseem (2013), Ramnath (2013), Almunia and Lopez-Rodriguez (2012), Marx (2012), andSeim (2012), and for an example in the retirement literature, see Brown (2013).…”

Section: Introductionmentioning

confidence: 99%

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Nonparametric Evidence on the Effects of Financial Incentives on Retirement Decisions

Manoli

Wéber

2016

American Economic Journal: Economic Policy

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Nonparametric Evidence on the Effects of Financial Incentives on Retirement Decisions Abstract This paper presents new evidence on the effects of retirement benefits on labor force participation decisions. The analysis is based on a mandated rule for employer-provided retirement benefits in Austria that creates discontinuities in the incentives for workers to delay retirement. We present graphical evidence on labor supply responses and effective financial incentives and develop nonparametric methods to estimate extensive margin labor supply elasticities. Overall, multiple results highlight modest impacts of financial incentives on retirement decisions. JEL-Code: H310, J140, J260. Terms of use: Documents in EconStor may

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Section: Relationship To the Literature On Bunching Estimation Technimentioning

confidence: 75%

Section: Introductionmentioning

confidence: 99%

Nonparametric Evidence on the Effects of Financial Incentives on Retirement Decisions

Manoli

Wéber

2016

American Economic Journal: Economic Policy

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“…We identify the causal impact of the SGA threshold on the extensive margin decision by exploiting a policy change that relaxed earnings restrictions significantly. Since the change in law affected only a subsect of DI beneficiaries, we can estimate 3 Recent studies relying on notches in the budget set examine such diverse topics as earnings adjustments to income and payroll taxes (Kleven and Waseem 2013;Tazhitdinova 2017), automaker responses to fuel economy regulations (Sallee and Slemrod 2012;Ito and Sallee 2016), the impact of transfer taxes on the real estate market (Kopczuk and Munroe, 2015;Best and Kleven, 2016), the effect of tax credits on retirement savings and income (Ramnath, 2013), the labor supply effects of social security (Brown, 2013;Manoli and Weber, 2016), and firm responses to stricter tax enforcement (Almunia and Lopez Rodriguez, 2017). See Kleven (2016) for a review of the bunching approach and the related literature.…”

Section: Introductionmentioning

confidence: 99%

Financial Incentives and Earnings of Disability Insurance Recipients: Evidence from a Notch Design

Ruh¹,

Staubli

2018

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Most countries reduce Disability Insurance (DI) benefits for beneficiaries earning above a specified threshold. Such an earnings threshold generates a discontinuous increase in tax liability -a notch-and creates an incentive to keep earnings below the threshold. Exploiting such a notch in Austria, we provide transparent and credible identification of the effect of financial incentives on DI beneficiaries' earnings. Using rich administrative data, we document large and sharp bunching at the earnings threshold. However, the elasticity driving these responses is small. Our estimate suggests that relaxing the earnings threshold reduces fiscal cost only if program entry is very inelastic.

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“…This finding runs counter to the stated goal of legislators: to raise retirement saving more broadly, and in particular for women hurt by time out of the labor force. But the lack of response to tax incentives among lower savers is consistent with Chetty et al (2014) and Ramnath (2013). These results suggest that changing 401(k) limits would be unlikely to provide a broad-based solution for low saving rates.…”

Section: Resultsmentioning

confidence: 53%

“…Chetty et al (2014), using Danish data, find that 85 percent of savers are "passive:" their saving rate increases only when it is done automatically. Ramnath (2013) finds no evidence that low-income Americans' retirement saving increases in response to the Saver's Tax Credit. a The increase in the maximum tax-deferred 401(k) contribution for participants age 50 and older provides a natural experiment in whether savers respond to a change in the tax incentives.…”

Section: Introductionmentioning

confidence: 97%

Do Tax Incentives Increase 401(K) Retirement Saving? Evidence from the Adoption of Catch-Up Contributions

Rutledge

Vitagliano

et al. 2014

SSRN Journal

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The U.S. government subsidizes retirement saving through 401(k) plans with $82.7 billion in tax expenditures annually, but the question of whether these tax incentives are effective in increasing saving remains unanswered. Using longitudinal U.S. Social Security Administration data on tax-deferred earnings linked to the Survey of Income and Program Participation, the project examines whether the "catch-up provision," which allows workers age 50 and over to contribute more to their 401(k) plans, has been effective in increasing earnings deferrals. The study finds that annual contributions increased by $818 more among age-50-plus individuals constrained by the 401(k) tax-deferral limits relative to similar workers just under age 50, suggesting that constrained individuals respond to tax incentives. For this group, the elasticity of retirement savings to the tax incentive is relatively high: a 1-percentage-point increase in the tax-deferred limit leads to a 0.2 percentage-point increase in 401(k) contributions.But barely 1 percent of lower-saving participants took advantage of catch-up contributions, suggesting that raising the 401(k) limit is not likely to be a broad-based solution to retirement saving shortfalls.

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Taxpayers' responses to tax-based incentives for retirement savings: Evidence from the Saver's Credit notch

Cited by 39 publications

References 19 publications

Nonparametric Evidence on the Effects of Financial Incentives on Retirement Decisions

Nonparametric Evidence on the Effects of Financial Incentives on Retirement Decisions

Financial Incentives and Earnings of Disability Insurance Recipients: Evidence from a Notch Design

Do Tax Incentives Increase 401(K) Retirement Saving? Evidence from the Adoption of Catch-Up Contributions

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