The Saver's Credit: Expanding Retirement Savings for Middle- and Lower-Income America

Brief

The Saver's Credit: Expanding Retirement Savings for Middle- and Lower-Income America

Abstract

The Saver's Credit, enacted in 2001, provides a government matching contribution, in the form of a nonrefundable tax credit, for voluntary individual contributions to 401(k)-type plans, IRAs, and similar retirement savings arrangements. This paper provides background on the evolution and design of the Saver's Credit, discusses the rationale behind the Saver's Credit and the role of such a credit in the retirement income security system as a whole, examines empirical data and models of the revenue and distributional effects of the Saver's Credit, and discusses measures that would expand the scope and improve the efficacy of the Saver's Credit.

The text below is an excerpt from the complete document. Read the full report in PDF format.

Introduction

For decades, the U.S. tax code has provided preferential tax treatment to employer-provided pensions, 401(k)-type plans, and Individual Retirement Accounts (IRAs) relative to other forms of savings. The effectiveness of this system of subsidies remains a subject of controversy. Despite the accumulation of vast amounts of wealth in pension accounts, concerns persist about the ability of the pension system to raise private and national savings, and in particular to improve savings among those households most in danger of inadequately preparing for retirement.

(End of excerpt. The entire report is available in PDF format.)

Read the full publication here (leaving the UI web site)

Research Area: 
To reuse content from Urban Institute, visit copyright.com, search for the publications, choose from a list of licenses, and complete the transaction.

LATEST IN Taxes and Budget

To reuse content from Urban Institute, visit copyright.com, search for the publications, choose from a list of licenses, and complete the transaction.