9 The Effects of Special Saving Programs on Saving and Wealth

The last decade has witnessed important changes in the way Americans save for retirement. In particular, individual retirement accounts (IRAs) and 401(k) plans have become popular targeted retirement saving vehicles. The IRA and 401(k) asset accumulation of many households is substantially greater than the combined value of their other financial assets. If current contribution patterns persist, the next generation of retirees will derive a substantial fraction of its support from resources accumulated in these accounts. This paper provides an overview of the nature of targeted retirement saving programs in the United States and a summary of the effects of these programs on the saving behavior and wealth of U.S. households. The paper is divided into five sections. The first presents descriptive information on the structure of IRAs and 401(k)s and summarizes the changing patterns of participation in these programs during the last decade. Section 9.2 summarizes information on the relative importance of assets in household wealth. Section 9.3 draws on previous studies of both IRA and 401(k) contributors to address the extent t