Automatic enrollment is slowly gaining steam as the choice strategy to encourage retirement saving.  A bold plan in California would eventually make the practice widespread and could revolutionize the state’s saving landscape. Last September, the California legislature approved a framework for automatically enrolling private-sector workers in a retirement savings plan.  Employers with more than five [...]

Most policymakers and economists agree that Americans don’t save enough. But which government policy does a better job encouraging saving and investment: tax subsidies such as 401(k)s, or mandatory savings systems such as traditional defined benefit pensions or auto-enrollment defined contribution accounts? An important new study finds that if the goal is boosting total savings–as opposed [...]

The new 2013 budget unveiled by President Obama on Monday again contains the Automatic IRA, which was developed by Brookings’ Retirement Security Project in conjunction with The Heritage Foundation. This year’s  version includes an important change that will also encourage more employers to offer a 401(k) account to their workers. However, important changes to the [...]

Tax-deferred 401(k) plans may be a better deal for low-income workers than economists thought, according to new research by my Tax Policy Center colleague Eric Toder and Urban Institute senior research associate Karen Smith. While high-income workers may get a bigger tax break from their 401(k)s, they also face a short-term trade-off. That’s because their [...]

Back in 2005, Congress gave many high-income savers a great gift, with the proviso that they couldn’t unwrap the package until this year. The bequest allowed the affluent to convert their traditional tax-deferred Individual Retirement Accounts into tax-free Roth IRAs. Now that these lucky investors have torn open the box, we’re beginning to learn what this opportunity will mean both for them and for federal revenues.

For the past decade, policymakers and pension experts have encouraged employers to increase worker participation in 401(k) plans by automatically enrolling their employees in these retirement programs. And it works. One study concludes that participation among new hires nearly doubles—from less than half to nearly 90 percent—when workers are auto-enrolled.

The stock market collapse of 2007-2009 was the worst since the 1930s, and rivaled in modern times only by the crash of 1973-74. But the real question for those counting on equities to help fund their retirement security is: “What are my long-term prospects in the wake of the carnage?”

High-income investors are about to enjoy a massive tax windfall from Uncle Sam. In just a few months, they’ll be able to convert their Individual Retirement Accounts–where investment earnings are taxable at withdrawal– to Roth IRAs– where they are tax-free. As financial planners are happily telling their big-ticket clients, this will be the gift that keeps on giving.

When it comes to retirement savings, the recent stock market collapse has surely focused the mind. For years, we embraced the lovely, but ultimately absurd, idea that double-digit returns on equity investments would continue forever. Now, retirees-in-waiting must get their arms around a market that lost half of its value between June, 2008 and March of this year.
In this gut-wrenching environment, how should we think about retirement savings? Harvard law professor Dan Halperin, a visiting scholar at TPC, has a provocative solution: He’d dump all tax-advantaged employer-based retirement savings plans and use the money—nearly $100 billion in 2009– to enhance Social Security.

Talk about a bad idea. Barack Obama and John McCain both want to give people tax incentives to empty their retirement savings accounts. They’d help contribute to a disastrous old age for many middle-class seniors, even as they provide a windfall to wealthy savers.
In the name of relieving financial hardship caused by the economic slowdown, Obama would allow penalty-free withdrawals from 401(k)s, IRAs, and the like of up to $10,000 for the next two years. McCain’s plan, which is even worse, would cut the tax rate to 10 percent on up to $50,000 of withdrawals in both 2008 and 2009. Workers contribute pre-tax money into these accounts and, currently, withdrawals are taxed at rates up to 35 percent.