The employer's matching employee contributions to 401(k) plans is spurring many lower-income workers to save. Here’s how much the average retirement savings account for household earnings across different income brackets.
Over the course of 82 pages, Michael Doran, a much-beloved but press-shy professor at the University of Virginia School of Law who also worked for the Office of Tax Policy at the U.S. Treasury Department under two different administrations, makes the following case:
“The result has been spectacular growth in the retirement accounts of higher-income earners but modest or even negative growth in the accounts of middle-income and lower-income earners. In 2014, the Bipartisan Policy Center launched the Commission on Retirement Security and Personal Savings as part of an effort to address the challenges facing Americans saving for retirement. The Commission, for instance, called for improving access to workplace retirement savings plans, long a shortcoming or 401 plans.
And Andrew Biggs, a senior fellow at the American Enterprise Institute, had this to say: “I’m not a big fan of law review articles on policy; they tend to make broad pronouncements and ad hominem attacks, coupled with a zillion footnotes referencing other law review articles. Very few have much effect on policy discussions; they’re mostly a by-lawyers, for-lawyers kind of thing.
But what Doran ignores is that you pay taxes on withdrawals, and high-income households pay higher taxes in retirement than low-income households. “What matters is the net,” said Biggs.
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