Implications of Proposed Tax Increases for Retirement Savings

Abstract

This analysis examines the implications of proposed payroll tax hikes, income tax increases, and a health care financing surtax for workers' retirement preparation. The retirement savings model is a rational forward-looking framework that aims to maintain a roughly constant standard of living before and after retirement. The results show that tax increases depress retirement savings, and may make it harder for retirement plans to pass non-discrimination tests.

Keywords: tax, retirement savings, replacement rate, living standard

JEL Classification: H24, E21