In January, another bipartisan collaboration between Alicia Munnell, a former Clinton administration economist and current director of the Center for Retirement Research at Boston University, and Andrew Biggs, a senior fellow at the conservative American Enterprise Institute, was launched. was held. Think tank — released paper calling for reduction or elimination of 401(k) tax benefits.
Their study found that the program did not increase participation in the program, nor did it significantly increase the amount Americans overall saved for retirement. It was primarily just a perk for high-income investors, and for that it was expensive. They estimated that it deprives the Treasury of nearly $200 billion in annual revenue. They proposed reducing or ending the tax-deferred status of 401(k)s and using the additional income to strengthen Social Security.
When I spoke with Mr. Biggs, he emphasized that he is not against 401(k)s. Overall, he thinks they’re doing a good job, and he says some of the criticism leveled at them is no longer valid. For example, the DIY aspect is overhyped. For example, most plans offer target-date funds that automatically adjust your asset allocation based on your age and goals, eliminating the need to constantly readjust your portfolio yourself. He acknowledged that reversing tax breaks could be politically difficult. The main beneficiaries of tax breaks are also the people who write checks to political campaigns. But he is confident that he will eventually be able to persuade Americans to give up the tax benefits. “If we say to people, ‘Look, we can cut Social Security benefits, we can raise Social Security taxes, or we can reduce this wasteful subsidy given to wealthy people who don’t need the money.’ ‘That’s a bit of a story’ is more convincing. ”
Mr. Hassett told me that working with Mr. Ghilarducci has done nothing to soften his belief in free markets. Quite the opposite. He believes government intervention to increase retirement savings is a necessary step to preserve American capitalism. Mr. Hassett has been concerned for some time that this country has been drifting toward socialism (the subject of his latest book), and part of the reason is that too many Americans are economically marginalized. This is because they have come to feel that this system does not suit their interests. advantage.
“They feel disconnected and disconnected,” Hassett said. It would be wise to ask the government to help you save for retirement. “That would give them more of a stake in the success of the free enterprise system,” he says. “I think it’s important for long-term political stability that everyone has a vested interest.”
Jen Forbath isn’t economically marginalized, but many in her community are struggling. Lorain, a city of about 65,000 people on the shores of Lake Erie, has not recovered from the loss of a Ford assembly plant and two steel plants. Approximately 28 percent of Lorand’s residents currently live in poverty. By the strict standards of her region, Ms. Forbath is doing well. “I’m definitely blessed,” she says. Still, she knows that even though she saves diligently and budgets carefully, she likely won’t be able to retire at age 65. She fears the possibility of having to remain in the labor market as an older person. “It’s like being a waitress. Once you get past a certain age, it’s really difficult,” she says. And she admits she feels uncomfortable that retirement may be an unattainable goal, even for someone like herself. “I feel like our system is failing too many people,” she says.
