An academic study published by the University of Michigan Retirement Research Center showed that higher-income wage earners over age 50 are contributing much more to their IRAs and 401(k)s than are other members of the same age cohort. The paper, written by Marjorie Honig and Irena Dushia and available at mrrc.isr.umich.edu, analyzed W-2 records from 1990-2003 and combined that data with tax-deferred contribution data in the Michigan Health and Retirement Study, conducted every two years since 1992.
The recent study found that while participation in and amount contributed to tax-deferred retirement plans increased substantially for every age cohort studied between 1984 and 2003, that participation significantly increased as wages increased–at less than 20% for respondents in the lowest two earnings quartiles, while participation among those in the highest quartile increased from about 20% in 1984 to 60% percent in 2003. As the authors write, “the findings suggest that respondents in the highest earnings quartile benefited most from the increased availability of employer provided tax-deferred plans.”
Putnam Investments has added a Lifetime Income Analysis Tool to its suite of retirement products, allowing 401(k) plan participants to project how much income their current retirement savings may generate in retirement and help them determine whether they are on track to achieve their desired lifestyle, Putnam said. It also provides them with an analysis of likely investment outcomes for their account based on their asset class mix, and gives them the ability to instantly reallocate their portfolio to better align with their retirement income goals.