This week, the Center on American Progress’ (CAP) Tax Expenditure of the Week series focused on tax-free retirement savings. Specifically, the brief noted that high earners benefit from this tax expenditure the most since they have more disposable income to put into savings. According to CAP, tax-free retirement savings are the second-largest tax expenditure yet, “Eighty percent of the tax benefits are claimed by the top twenty percent of income earners. The bottom three-fifths enjoy only seven percent of the benefit.”
To shift the balance and benefit of this tax expenditure to low-income workers, CAP discussed several ideas, including providing tax credits to workers rather than deductions. This would result in workers receiving the same dollar amount regardless of income. Consequently, this would help those in the low and middle-income brackets by providing a subsidy worth more percentage wise than that of the high earners.
As shown by WOW’s national Elder Economic Security Standard™ Index, Social Security is not enough to take care of one’s necessities in retirement. It is also more than 90% of income for 3 in 10 elders, due to a lack of savings in other areas, such as 401(k)s and pensions. Without a more progressive structure that incentivizes workers save for retirement, low and middle-income elders will increasingly depend on Social Security to meet their basic needs.
Communications and Program Coordinator
Elder Economic Security Initiative