HomeFinance NewsPersonal financeRetirement Funds Under Fire: Controversial Plan Threatens Tax Breaks

Retirement Funds Under Fire: Controversial Plan Threatens Tax Breaks


To shore up Social Security, this controversial proposal calls for limiting retirement plan tax perks


Economists Andrew Biggs and Alicia Munnell propose limiting current tax perks for retirement savings plans, such as 401(k)s and IRAs, to shore up Social Security’s projected funding gap.

Believe that these tax preferences, which amounted to about \$185 billion to \$189 billion in reduced federal income taxes in 2020, have virtually no impact on retirement saving behavior.

By rolling back these incentives, the money saved could provide immediate funding to Social Security and give lawmakers more time to consider other changes like tax increases or benefit adjustments.

Critics argue that eliminating or reducing these tax benefits would discourage workers from saving for retirement, potentially increasing the burden on Social Security in the long run.

They also point out that these plans have helped many Americans accumulate substantial retirement savings.

Despite the pushback, Biggs and Munnell maintain that their proposal is necessary to address the financial challenges facing Social Security.

  • Overall sentiment: negative
  • Positive

    “Together, they call for limiting current tax preferences for retirement savings plans, and instead redirecting those funds to help shore up Social Security.”

    “That would provide immediate funding to the program that provides the nation’s retirement, disability and family benefits, and give lawmakers more time to consider other changes such as tax increases or benefit adjustments that would have to be more gradually phased in, according to Biggs.”


    “Tax incentives to save in work retirement plans reduce federal tax revenue and don’t meaningfully change saving behavior, economists contend.”

    “There’s no debate that Social Security’s funds — which are projected to become insolvent in the next decade — need fixing.”

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