The Key Determinants and Effects of Pension Participation among Working Adults

Abstract

This paper examines the key determinants and effects of pension participation among working adults ages 22-61. I am specifically interested in pension participation and its effects among the low income population. Using the Panel Study of Income Dynamics (PSID), I find that the key determinants of pension participation are income, age, education, having a transaction account, marital status among men and employment under union contract. Furthermore, my results suggest that holding income, age and education constant, participation in both an employer pension and IRA is positively correlated with wealth accumulation. The effects of employer pensions only however, are inconclusive. I discuss the implications of these results and provide an overview of legislation and policy proposals that aim to increase pension participation and better ensure financial security in retirement.