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Brief

Tax Incentives for Retirement Savings

Eric Toder, Surachai Khitatrakun, Aravind Boddupalli
May 11, 2020
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Abstract

Federal tax law provides substantial tax incentives for retirement saving. These include the deferral of taxes on contributions to retirement savings accounts by employers, employees, and self-employed taxpayers and the earnings on these contributions until the funds are withdrawn in retirement for traditional retirement accounts; the exemption of investment income accrued within retirement accounts for Roth retirement accounts; and a retirement savings tax credit for low-income taxpayers. This chartbook explores the implications of current-law income tax incentives for retirement savings, illustrates alternative ways of measuring the tax benefits they generate, and analyzes the distributional impacts of alternative tax proposals to encourage retirement saving. We find that tax incentives for retirement saving provide the largest benefits as a share of income to upper-middle-income taxpayers.

Research Area

Individual Taxes Federal Budget and Economy
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Meet the Experts

  • Eric Toder
    Institute Fellow and Codirector, Tax Policy Center
  • Surachai Khitatrakun
    Senior Research Associate
  • Aravind Boddupalli
    Research Associate
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