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Retirement

Automatic Retirement Savings Plans for Low-Income Households

Automatic Retirement Savings Plans for Low-Income Households

We analyze a new illustrative policy to create automatic retirement savings accounts for more than 56 million low-income Americans by 2030. The program is fully financed by removing the gross income adjustment for traditional 401k and similar retirement accounts without any additional contribution from households or employers. The program relies on the existing EITC administration without employer participation. After accounting for risk, individual account balances reach over $200,000 by retirement and any balances can be bequeathed upon death.

Putting the Pension Back in 401(k) Retirement Plans: Optimal Versus Default Longevity Income Annuities

Putting the Pension Back in 401(k) Retirement Plans: Optimal Versus Default Longevity Income Annuities
  • A recent regulatory change makes it easier for people to use 401(k) and IRA money to buy Longevity Income Annuities (LIAs) that pay out a lifetime benefit starting no later than age 85.
  • The benefits of purchasing an LIA are positive for most people, but differ by sex, education, wealth and life expectancy. The benefit men receive from purchasing an LIA is more than double the benefit for women.
  • In a recent working paper, Wharton faculty member, Olivia Mitchell, and coauthors argue that using about 10% of 401(k) and IRA savings above a threshold to purchase LIAs would enhance wellbeing.