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Publications
  • 2020
  • Chapter
  • Tax Policy and the Economy, Volume 34

Building Emergency Savings Through Employer-Sponsored Rainy-Day Savings Accounts

By: John Beshears, James J. Choi, J. Mark Iwry, David C. John, David Laibson and Brigitte C. Madrian
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Abstract

Roughly half of Americans live paycheck to paycheck. When financial shocks occur during their working life, many of these households tap into their retirement savings accounts. We explore the practical considerations and challenges associated with helping households accumulate liquid savings that can be deployed when urgent pre-retirement needs arise. We propose that this can be achieved cost effectively by automatically enrolling workers into an employer-sponsored payroll deduction “rainy-day” or “emergency” savings account, and we explore three specific implementation options: (a) after-tax employee 401(k) accounts, (b) deemed Roth IRAs under a 401(k) plan, and (c) depository institution accounts. We evaluate the pros and cons of each approach and conclude that all three approaches merit exploration and field testing. We refer practitioners interested in seeing each implementation option discussed in its own self-contained section to the version of this paper distributed as NBER Working Paper No. 26498.

Keywords

Savings; Household; Saving

Citation

Beshears, John, James J. Choi, J. Mark Iwry, David C. John, David Laibson, and Brigitte C. Madrian. "Building Emergency Savings Through Employer-Sponsored Rainy-Day Savings Accounts." In Tax Policy and the Economy, Volume 34, edited by Robert A. Moffitt, 43–90. Chicago: University of Chicago Press, 2020.
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About The Author

John Beshears

Negotiation, Organizations & Markets
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More from the Authors

    • 2022
    • Faculty Research

    Automating Short-Term Payroll Savings: Initial Evidence from a Large U.K. Experiment

    By: Sarah Holmes Berk, John Beshears, James J. Choi and David Laibson
    • 2022
    • Behavioral Science & Policy

    How to Choose a Default

    By: John Beshears, Richard T. Mason and Shlomo Benartzi
    • AEA Papers and Proceedings

    Present Bias Causes and Then Dissipates Auto-enrollment Savings Effects

    By: John Beshears, James J. Choi, David Laibson and Peter Maxted
More from the Authors
  • Automating Short-Term Payroll Savings: Initial Evidence from a Large U.K. Experiment By: Sarah Holmes Berk, John Beshears, James J. Choi and David Laibson
  • How to Choose a Default By: John Beshears, Richard T. Mason and Shlomo Benartzi
  • Present Bias Causes and Then Dissipates Auto-enrollment Savings Effects By: John Beshears, James J. Choi, David Laibson and Peter Maxted
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