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Abstract
We examine the 10-year follow-up effects on retirement saving of an individual development account (IDA) program using data from a randomized experiment that ran from 1998 to 2003 in Tulsa, Oklahoma. The IDA program included financial education, encouragement to save, and matching funds for several qualified uses of the saving, including contributions to retirement accounts. The results indicate that as of 2009, 6 years after the program ended, the IDA program had no impact on the propensity to hold a retirement account, the account balance, or the sufficiency of retirement balances to meet retirement expenses.
Notes
1. IDAs have also been studied using nonexperimental methods. A number of studies (e.g., Mills et al., 2008; Rademacher, Wiedrich, McKernan, Ratcliffe, & Gallagher, Citation2010) have compared IDA participants to samples of non-IDA participants. These comparisons are less than ideal because people who signed up for IDAs are not a random sample of low-income households, even after controlling for observables (as shown in Grinstein-Weiss et al., Citation2013; Mills et al., 2008). Other studies examine associations of IDA program and participant characteristics with IDA saving outcomes (Schreiner & Sherraden, Citation2007). These studies are informative but are not designed or reported as impact tests. Another set of studies (Sherraden & Moore McBride, Citation2010; Sherraden, Moore McBride, Hanson, & Johnson, Citation2005) report results of in-depth interviews with IDA participants. These analyses illuminate participation patterns in the IDA program and document participants’ assessment of results, and do not claim to test impacts.
2. In related work, Engelhardt, Eriksen, Gale, and Mills (Citation2010) use Tulsa IDA treatment status as an instrument for homeownership using 2003 data and find no net impact of homeownership on the provision of social capital.
3. See Mills, Patterson, Orr, and DeMarco (Citation2004) and Grinstein-Weiss et al. Citation(2013) for more information on the data and survey methods.
4. General money-management training and asset-specific training were part of the Tulsa program’s financial-education component. Program staff members sent out monthly deposit-reminder postcards and provided case management, including assistance and consultation by phone or in-person. The bank paid matches directly to the vendor.
5. The bank charged no monthly maintenance fee for the account. It charged no fees to open or withdraw from the account if the respondent made fewer than three withdrawals in 1 year (the third and subsequent withdrawals induced a $3 fee). The bank allowed participants to transfer money automatically into the IDA via direct deposit.
6. In particular, CAPTC provided a housing-subsidy program that offered low-income households up to $4,000. As a result, during the experimental period through 2003, treatment group members had access to the CAPTC IDA, yet both control and treatment group members were restricted from other CAPTC housing-subsidy programs available to other low-income households. After 2003, treatment and control group members were again eligible for all CAPTC programs. All sample members could use CAPTC services for tax preparation, employment, education, childcare, and so on during the experiment period. Control group members could also receive individual counseling from CAPTC and, if they requested it, they were provided with general financial information and referrals to other agencies in the Tulsa area that provided similar services. At these agencies, control group members were free to seek any service for which they qualified.
7. Among wave-4 respondents who met age criteria, 69, or 8.5%, were missing data on retirement assets, the central dependent variable in this study.