Tax Breaks for Retirement Savings

Teresa GhilarducciChristian Weller
Written By SCEPA

BRIEF

SCEPA's Teresa Ghilarducci and the Center for American Progress' Christian Weller recommend improving retirement savings incentives.

The main mechanism offered is an improvement of the federal government’s system of retirement savings incentives. On October 30th, they published a paper on The Inefficiencies of Existing Retirement Savings Incentives and hosted an event with academic and political experts to discuss the issue in depth. On November 18th, they released a second paper on Laying the Groundwork For More Efficient Retirement Savings Incentives that contains proposals for reform.

Ghilarducci and Weller’s research concludes that the federal government’s current policy to encourage retirement savings through the tax code is both inequitable and inefficient. The wealthy have higher marginal tax rates and therefore benefit more from tax deductions than the poor and middle class. Furthermore, research has shown that wealthy households would save anyways and tax deductions merely encourage them to shift their savings into retirement accounts to lower their tax bill.

The authors suggests five policy reforms to make the federal government’s retirement savings incentives more fair and effective:

  • Make the Saver’s Credit fully available to lower-income households

  • Establish and expand progressive savings matches

  • Simplify retirement savings incentives by streamlining rules

  • Limit the automatic increases of tax deductions

  • Create simple, low-cost, and low-risk options for people to save for retirement outside of employer plans

SCEPA
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