Saving incentives for low- and middle-income families
Subtitle: evidence from a field experiment with h&r block
By: Esther Duflo ... [et al.].
Contributors: Duflo, Esther, 1972-; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11680; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11680.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Individual retirement accounts -- United States.; Tax credits -- United States.; Retirement income -- United States.; Saving and investment -- United States.
Description: "This paper analyzes the effects of a large randomized field experiment carried out with H&R Block, offering matching incentives for IRA contributions at the time of tax preparation.  About 14,000 H&R Block clients, across 60 offices in predominantly low- and middle-income neighborhoods in St.  Louis, were randomly offered a 20 percent match on IRA contributions, a 50 percent match, or no match (the control group).  The evaluation generates two main findings.  First, higher match rates significantly raise IRA participation and contributions.  Take-up rates were 3 percent for the control group, 8 percent in the 20 percent match group, and 14 percent in the 50 percent match group.  Average IRA contributions (including non-contributors, excluding the match) for the 20 percent and 50 percent match groups were 4 and 7 times higher than in the control group, respectively.  Second, several additional findings are inconsistent with the full information, rational-saver model.  In particular, we find much more modest effects on take-up and amounts contributed from the existing Saver's Credit, which provides an effective match for retirement saving contributions through the tax code; we suspect that the differences may reflect the complexity of the Saver's Credit as enacted, and the way in which its effective match is presented.  Taken together, our results suggest that the combination of a clear and understandable match for saving, easily accessible savings vehicles, the opportunity to use part of an income tax refund to save, and professional assistance could generate a significant increase in contributions to retirement accounts, including among middle- and low-income households"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
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