Who Uses the Roth 401(k), and How Do They Use It?

John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian

NBER Working Paper No. 19193
Issued in July 2013
NBER Program(s):Aging, Public Economics

Using administrative data from twelve companies that added a Roth 401(k) option between 2006 and 2010, we describe the characteristics of Roth contributions. Approximately one year after the Roth is introduced, 9% of 401(k) participants have positive Roth balances. Roth participation is more than twice as high among 401(k) participants who were hired after the Roth introduction than among 401(k) participants who were hired before the Roth introduction. In essence, once an employee joins a 401(k) she becomes passive/inattentive, thereby reducing the likelihood of reacting to the introduction of a new Roth option. Conditional on contributing to the Roth, 66% of employee contributions go to the Roth, and half of employees contribute to both the Roth and another 401(k) account, consistent with a tax diversification motive. Roth usage is decreasing in age, less likely among women, and only weakly correlated with salary and tenure once we control for other employee characteristics.

A non-technical summary of this paper is available in the 2013 number 2 issue of the NBER Bulletin on Aging and Health. You can sign up to receive the NBER Bulletin on Aging and Health by email.

Acknowledgments and Disclosures

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Document Object Identifier (DOI): 10.3386/w19193

Published: Who Uses the Roth 401(k), and How Do They Use It?, John Beshears, James J. Choi, David Laibson, Brigitte C. Madrian. in Discoveries in the Economics of Aging, Wise. 2014

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