Policy Brief: The Interaction Between IRAs and 401(k) Plans in Savers' Portfolios

This brief discusses how savers’ contributions are linked across different types of tax-preferred accounts. Previous research has concluded that workers who become eligible for a 401(k) plan also see stronger growth in IRA balances. However, the mechanism for this increase – contributions, asset growth, rollovers, etc. – is a puzzle. Using a sample of tax returns from 1999-2014, and two different control groups that have stronger and weaker tastes for saving, respectively, than the treatment group, we find virtually no link between new 401(k) contributions and new IRA contributions. Households who start contributing to 401(k) plans do not have higher propensities to start contributing to IRAs, raise IRA contributions, own IRAs, or have higher IRA balances in level or first-differences.