One reason older workers have inadequate retirement savings is that many are locked into low-paying jobs that don’t provide access to a retirement plan.

But in the tax reform plan just unveiled by Congress, nothing is done to resolve the situation—instead, suggestions are made on taxes that would make an existing regressive system even worse.

So says a report from the Retirement Equity Lab at The New School, which says that even though U.S. Bureau of Labor Statistics reports a low (3.2 percent) unemployment figure for workers 55 and older as of September, the picture is deceptively rosy.

Many older workers, the report points out, have low-paying jobs that don’t allow them to improve their retirement preparedness.

And the tax situation doesn’t help, it adds, pointing out that the top 20 percent of earners get 66 percent of all federal retirement savings tax breaks.

Not only do older workers have little retirement savings ($12,000 on average), in spite of the $180 billion in tax breaks a year designed to encourage people to save for retirement, 35 percent of those near retirement who lack retirement plans get no benefit from such breaks whatsoever.

What Republicans have proposed in their latest legislative effort would make it even tougher for those in lower income brackets to save, since they propose paying for the tax breaks for higher-income people by “suggest[ing] the needed revenue could come from taxing 401(k) dollars on contribution rather than at withdrawal in retirement, funding current tax breaks by shifting retirement subsidies to the future.”

And that would be a major obstacle to saving for many in the lower income brackets, since, the report points out, “Tax incentives are a key driver of retirement plan coverage and adequacy.”

Depriving lower-income workers of tax breaks to save for retirement will go a long way toward worsening the already-existing retirement crisis; instead, the report suggests that Congress consider putting in place guaranteed retirement accounts (GRAs), which “provide accounts to all workers as a supplement to an expanded Social Security program,” as well as “replac[ing] regressive retirement subsidies with universal tax credits of $600 a year. This ensures that even low earners benefit from federal tax incentives to save for retirement.”

Instant Insights /

Older workers in low-paying jobs not helped by tax plan

More From HR Executive

Related Stories

Recommended For You