Private Savings Accounts as part of Social Security may be going or gone or on the horizon. Proponents of private savings accounts always sidestep the issue of why putting money into private accounts has to be part of Social Security. After all, there are banks and credit unions, and we can all open savings accounts there. In addition, the federal government has created various retirement savings vehicles. So why isn't that enough?
The obvious answer is that poor people spend every last dime on just staying alive. But that's not the whole reason. The federal government actually structures savings accounts to put barriers in the way of the poor. This is, of course, the flip side of giving incentives to the rich.
But it's about much, much more than that.
A new report by the Retirement Security Project investigates this question as it relates to those most at risk. The Retirement Security Project, Policy Brief Here is the lead in to the short (8 page) version of the report
This policy brief describes the steps that both the federal government and state governments can take to reduce an important barrier to retirement saving among low-income families: the asset tests in means-tested benefit programs. A growing body of evidence suggests that low-income families will contribute to retirement accounts if they are presented with effective and transparent incentives to do so and have easy access to a savings vehicle. The asset tests associated with means-tested benefit programs, however, often penalize those who do save, undermining the broader goal of encouraging retirement saving. Furthermore, the rules applied under these tests to retirement accounts are confusing and often treat 401(k) accounts and IRAs in a seemingly arbitrary manner.
The informative press release by the Center on Budget and Policy Priorities and Retirement Security Project is here.
More information is available via the RSP website.
So why not just remove these barriers, raise wages, rather than destroy Social Security?
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