Final answer:
Workers save for retirement by setting aside part of their current income, which exceeds their needs. Retirement savings can be influenced by changes in income, future outlook, and government programs like Social Security, which may decrease personal savings. Additionally, 401(k) accounts with special tax statuses are commonly used for retirement saving.
Step-by-step explanation:
Most workers save for retirement because their current income exceeds their immediate needs, providing them with the opportunity to save and invest in financial markets. Retirement saving is influenced by changes in income and perceived needs in the future. An increase in income typically leads to an increase in the amount saved.
Changes in government programs, such as Social Security, can also affect how much workers save. There is evidence suggesting that Social Security may have led to a reduction in the amount of financial capital saved by workers. This implies that Social Security has potentially shifted the supply of financial capital to the left at any given interest rate.
Beyond public programs, many individuals also save for retirement through employer-sponsored plans. 401(k) accounts are a popular workplace savings option due to their special tax status, allowing for tax-deferred growth of investments in instruments like stocks and bonds until withdrawal.