Social Security Report

Eliminating Tax-preferred Retirement Savings–A Way to Address Insolvency? - GoBankingRates

A study published recently by The Center for Retirement Research has called into question the possibility of eliminating “retirement saving tax preferences on employer-sponsored plans” and diverting the increased income tax revenue directly into Social Security to help address the looming benefit shortfall. In a post today on finance.yahoo.com, GoBankingRates’ Vance Cariaga provides an analysis of the Center’s suggestion to repeal the tax preferences of employer-sponsored 401(k)s and IRAs, analyzing the pros and cons of such a move.

Cariaga cites Survey of Consumer Finances data indicating that 93% of households in the top 10% income brackets were taking advantage of the types of plans addressed by the Center’s proposals, supporting the conclusion that “401(k)s mainly help the wealthy.” He noted that the median balance for these account holders in 2022 stood at $559,000, compared to a $39,000 median balance held by middl-income Americans. While that comparison supports the Center’s assumptions regarding who benefits from tax preferences, he notes there is a counter-argument in support of retraining the plans as they currently exist.

In discussing the other side of the argument, Cariaga offers this quote from Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute, “It’s not only the rich [who benefit]. A lot of middle-class people have 401(k)s, and typically, that’s the bulk of their savings outside of their homes.”

Read the Cariaga post in full here.

It’s an interesting point of contention on a subject–Social Security’s rapidly unraveling financial picture–that will likely go into the mix of solutions proposed in the months and years ahead as Congress seeks an approach to putting Social Security on a sustainable footing. Although no defined timetable has been set for addressing the problem–that has been known for decades–anyone watching the issue is well aware that the clock is ticking toward a financial catastrophe in less than ten years. The link provided above connects readers to the full content of the posted article. The URL (internet address) for this link is valid on the posted date; socialsecurityreport.org cannot guarantee the duration of the link’s validity. Also, the opinions expressed in these postings are the viewpoints of the original source and are not explicitly endorsed by AMAC, Inc.; the AMAC Foundation, Inc.; or socialsecurityreport.org.