SBR95-11321), as well as to Merrill Lynch, Inc., for financial support. We would also like to thank KPMG Peat Marwick LLP, and in particular Martha Priddy Patterson, for making available the data used to conduct We examine the effects of education on financial decision-making skills by identifying an interesting source of variation in pertinent training. During the 1990s, an increasing number of individuals were exposed to programs of financial education provided by their employers. If, as some have argued, low saving frequently results from a failure to appreciate economic vulnerabilities, then education of this form could prove to have a powerful effect on rates of behavior. The current paper undertakes an analysis of these programs using a previously unexploited survey of employers. We find that both participation in and contributions to voluntary savings plans are significantly higher when employers offer retirement seminars. The effect is typically much stronger for non-highly compensated employees than for highly compensated employees. The frequency of seminars emerges as a particularly important correlate of behavior. We are unable to detect any effects of written materials, such as newsletters and summary plan descriptions, regardless of frequency. We also present evidence on other determinants of plan activity.

and the National Bureau of Economic Research provided helpful comments. We would also like to thank

This paper analyzes the impact of automatic enrollment on 401(k) savings behavior. We have two key findings. First, 401(k) participation is significantly higher under automatic enrollment. Second, a substantial fraction of 401(k) participants hired under automatic enrollment retain both the default contribution rate and fund allocation even though few employees hired before automatic enrollment picked this particular outcome. This “default ” behavior appears to result from participant inertia and from employee perceptions of the default as investment advice. These findings have implications for the design of 401(k) savings plans as well as for any type of Social Security reform that includes personal accounts over which individuals have control. They also shed light more generally on the importance of both economic and noneconomic (behavioral) factors in the determination of individual savings behavior.

this report. We would like to express our appreciation to Bob Friedman, who, as founder and chair of the Corporation for Enterprise Development (CFED), conceived and produced ADD. We also thank Ren Bryce-Laporte and other CFED staff for their work in the implementation of ADD and for their cooperation with the research. The productive working relationship between CFED and the Center for Social Development (CSD) has played a major role in innovation and knowledgebuilding for Individual Development Accounts (IDAs). We are especially grateful to the host organizations in ADD and to the staff who run the IDA programs. From the outset, they have been committed to ADD research. For this report, program staff operated the Management Information System for Individual Development Accounts (MIS IDA) and spent considerable time with CSD staff to check and to correct data. Their time and effort has made this part of the ADD research possible. To our knowledge, this is the first time that software has been created to track all participants in a policy demonstration and also to serve as a management information system. This has required large investments of time and resources to create and upgrade the software, provide support, facilitate data collection, make the data as accurate as possible, and undertake analysis. Over the past five years, a large research team has made this possible, and every member of the team cannot be fully acknowledged here. In addition to the authors, I would like to acknowledge Lissa Johnson, who manages the ADD research program and led the development of MIS IDA; Dan Kelley, who oversees the MIS IDA technical support line; and Jenny Kraus and Suzanne Fragale, who formatted this report. Previous ADD research reports have informed developments in federal an...

participants at Brookings, Northwestern, TAPES, and Tax Economists ’ Forum. We also thank Tats Kanenari and Norma Coe for outstanding research assistance, Bill Even for providing the CPS data extract used in the paper, and Stacy Furukawa for assistance with the data. Gale gratefully acknowledges financial support from the National Institute on Aging under grant AG11836. All opinions are our own and should not be attributed to the staff, officers, or trustees of the Federal Reserve Board or the This paper provides a new econometric specification and new evidence on the impact of 401(k) plans on household wealth. We allow the impact of 401(k)s to vary over both time and earnings groups. Our specification--motivated by a variety of theoretical considerations and data patterns--generalizes earlier work in the literature, and we show that the modeling constraints imposed by previous authors are rejected by the data. Using data from 1987 and 1991 from the Survey of Income and Program Participation, we find that the effects of 401(k)s on household wealth vary significantly by earnings level. Our analysis implies that 401(k)s held by groups with low earnings, who hold a small portion of 401(k) balances, are more likely to represent additions to net wealth than 401(k)s held by high-earning groups, who hold the bulk of 401(k) assets. Thus, between 0 and 30 percent of 401(k) balances represent net additions to private

This study is the first quantitative look at the effects of financial education on savings outcomes for the poor in Individual Development Accounts. The findings suggest that financial education has sizeable effects, and that courses need not be long to take advantage of them. Marketing and public-policy implications are noted.

. Hosking (J. R. Statist. Soc. B, 1990) and Hosking and Wallis (Regional frequency analysis: an approach based on L-moments, Cambridge University Press, 1997) have described L-moments and L-moment ratios, quantities useful in the summarization and estimation of probability distributions. This report contains details of Fortran routines that should facilitate the use of L-moment-based methods. The routines described in this Research Report are available on the electronic software repository StatLib, at the Internet location http://lib.stat.cmu.edu/general/lmoments. They can also be obtained from StatLib by electronic mail. To obtain them use: mail statlib@lib.stat.cmu.edu send lmoments from general That is, send a message via e-mail to statlib and include the words "send lmoments from general" in the subject line or in the body of the message. To find out about StatLib use: mail statlib@lib.stat.cmu.edu send index Contents Introduction 1 Routines for specific distributions 4 R...

Introduction The question of how to help the poor get rich is, in essence, the question of how to help them build assets. Poverty is a trap because resources are needed to produce resources. Poor people must consume most of their incoming resources, so they cannot save much. With low savings, they do not produce enough to increase their income enough to break the cycle. To escape from poverty requires capital, be it human, physical, social, or financial. Many U.S. policies subsidize asset accumulation (Sherraden, 1991), sometimes to combat poverty. For example, the most important asset of the poor is their human capital, and the most widespread asset-subsidy policy is public education. Deductions for mortgage interest subsidize home ownership, the bedrock of the middle class and the second-most important asset of the poor. Subsidized student loans (and public colleges and universities) and subsidized retirement accounts are other common asset subsidies that reduce poverty. The Homeste

Can the poor save? Data collected with the Management Information System for Individual Development Accounts (MIS IDA) in the American Dream Demonstration (ADD) show that they can. About half of participants had net IDA savings of more than $100, and monthly savings averaged $16.60. While participant characteristics were linked with IDA savings, no single characteristic (such as receipt of welfare or very low income) precluded saving. More relevant for policy is that several aspects of IDA design---including the match rate, match cap, time limits, use of automatic transfer, financial education, and restrictions on unmatched withdrawals---were strongly linked with saving. Overall, it seems that institutions for saving, when offered to the poor, work much like they do for the non-poor.

(UL � 0 (QJHQ DQG:LOOLDP * *DOH