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Atlanta Fed Working Papers


Understanding 401(k) Plans

Ramon P. DeGennaro and Deborah L. Murphy
Working Paper 2004-21
September 2004

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Questions about the future of the Social Security system continue to surface. As a result, interest in employer-sponsored retirement plans and other retirement investment options increases. But the restrictions and rules associated with various defined benefit plans such as 401(k), 403 (b), and 457 plans can be confusing, and these plans have risks of their own. The authors explore these plans and explain the need to view retirement savings as only one part of a portfolio.

JEL classification: G11, G20, G29

Key words: asset, allocation, savings, taxes, pension, retirement


The views expressed here are the authors’ and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System. Any remaining errors are the authors’ responsibility.

Please address questions regarding content to Ramon P. DeGennaro, SunTrust Professor of Finance, the University of Tennessee, Knoxville, Tennessee 37996, 865-974-3216 and Visiting Scholar, Federal Reserve Bank of Atlanta, 1000 Peachtree Street, N.E., Atlanta, Georgia 30309-4470, rdegenna@utk.edu and Deborah L. Murphy, Associate Professor of Finance and Reagan Scholar, the University of Tennessee, Knoxville, Tennessee 37996, 865-974-8396, dgunthor@utk.edu.

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