Upside-Down Tax Incentives



Retirement is ultimately a costly proposition since people can spend decades without earning money from work and taking care of their loved ones and themselves. They hence need to save a lot of money outside of Social Security for their own future. Policy offers some help to people wanting to save for their retirement, but it provides the least help to those who face the largest risk exposure and thus greatest obstacles to saving more. The federal government already uses the tax code to incentivize people to save, typically through tax advantages for particular savings such as retirement savings in 401(k) plans. But these savings incentives are complex and favor higher income earners over those with lower earnings. The help that the tax code offers consequently does little to combat the growing retirement crisis since it fails to adequately target those who actually need help.


Income Earner Retirement Plan Retirement Saving Lower Income Earner High Income Earner 
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© Christian E. Weller 2016

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