Highest earners get biggest tax breaks for saving for retirement

[Donnachaidh]

http://www.epi.org/economic_snapshots/entry/highest_earners_get_biggest_tax_breaks_for_saving_for_retirement/


Low wage earners face the most challenges saving for retirement, yet the tax subsidies for retirement saving are skewed overwhelmingly in favor of top earners. Since tax breaks for 401(k)s and similar retirement plans are tied to a participant’s income tax rate, low-income taxpayers receive modest or no tax subsidies for each dollar put into these plans. The highest-paid workers, who have more resources to save for retirement without government assistance, receive the largest tax breaks. The problem is compounded by the fact that higher-paid workers are more likely to be offered a plan by their employer, and to receive a generous employer match, so they’re more likely to participate.


see the chart at the link --

[bbinacan]

1. Partly Bullshit

"The problem is compounded by the fact that higher-paid workers are more likely to be offered a plan by their employer, and to receive a generous employer match, so they’re more likely to participate."

401k plans have top-heavy testing and testing of highly-compensated employees. If the company fails the test, they either have to increase the match for lower compensated employees or they may have to return some of the highly-compensated's contribution.

edit for spelling

[Jazzgirl]

2. I was testing

Deleting message.

[gmoney]

3. doesn't make sense

If I'm lower income and in the 15% tax bracket and put $1000 in a retirement account, that's $150 in taxes I avoid by socking it away.

If I'm earning more and in the 28% tax bracket and put $1000 in a retirement account, that's $280 in taxes I avoid by saving it.

Is this article saying that's unfair?

[ArcticFox]

4. Not sure about the chart, but there are other plans

SEP plans, for example, allow tax free contributions up to the lesser of $49,000 or 25% of compensation every year. Somebody making $200,000 could therefore have a $49,000 contribution while another person at the same company making only $80,000 would have a $20,000 contribution.