Building on What Works: A Proposal to Modernize Retirement ...

DISCUSSION PAPER 2015-05 | JUNE 2015

Building on What Works: A Proposal to Modernize Retirement Savings

John N. Friedman

The Hamilton Project ? Brookings 1

MISSION STATEMENT

The Hamilton Project seeks to advance America's promise of opportunity, prosperity, and growth. We believe that today's increasingly competitive global economy demands public policy ideas commensurate with the challenges of the 21st Century. The Project's economic strategy reflects a judgment that long-term prosperity is best achieved by fostering economic growth and broad participation in that growth, by enhancing individual economic security, and by embracing a role for effective government in making needed public investments. Our strategy calls for combining public investment, a secure social safety net, and fiscal discipline. In that framework, the Project puts forward innovative proposals from leading economic thinkers -- based on credible evidence and experience, not ideology or doctrine -- to introduce new and effective policy options into the national debate. The Project is named after Alexander Hamilton, the nation's first Treasury Secretary, who laid the foundation for the modern American economy. Hamilton stood for sound fiscal policy, believed that broad-based opportunity for advancement would drive American economic growth, and recognized that "prudent aids and encouragements on the part of government" are necessary to enhance and guide market forces. The guiding principles of the Project remain consistent with these views.

2 Informing Students about Their College Options: A Proposal for Broadening the Expanding College Opportunities Project

Building on What Works: A Proposal to Modernize Retirement Savings

John N. Friedman

Brown University

JUNE 2015

NOTE: This discussion paper is a proposal from the author(s). As emphasized in The Hamilton Project's original strategy paper, the Project was designed in part to provide a forum for leading thinkers across the nation to put forward innovative and potentially important economic policy ideas that share the Project's broad goals of promoting economic growth, broad-based participation in growth, and economic security. The author(s) are invited to express their own ideas in discussion papers, whether or not the Project's staff or advisory council agrees with the specific proposals. This discussion paper is offered in that spirit.

The Hamilton Project ? Brookings 1

Abstract

Workers rely more than ever on individually directed retirement savings vehicles, such as defined-contribution plans and IRAs, to provide the income necessary for a comfortable retirement. Yet our current system contains many features that make it easier for workers to spend than to save, and it inefficiently spends federal dollars on incentives with questionable effectiveness. This paper proposes two related reforms that build on evidence about how to increase retirement savings by increasing the benefits and decreasing the costs to employers of helping their employees save. First, this paper recommends combining all of the various types of retirement accounts into a single Universal Retirement Saving Account. Second, this paper recommends replacing part of the individual tax subsidy for retirement savings with large tax credits directed to employers who help workers save. These two reforms would generate large increases in savings for middle-class workers and, ultimately, in the well-being of retirees.

2 Building on What Works: A Proposal to Modernize Retirement Savings

Table of Contents

A B S T R AC T

2

CHAPTER 1. INTRODUCTION

5

CHAPTER 2. THE CHALLENGE

7

CHAPTER 3. THE PROPOSAL

13

CHAPTER 4. QUESTIONS AND CONCERNS

24

CHAPTER 5. CONCLUSION

27

AUTHOR AND ACKNOWLEDGEMENTS

28

ENDNOTES

29

REFERENCES

30

The Hamilton Project ? Brookings 3

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download