The Great American Retirement Fraud

82 Pages Posted: 1 Jan 2022

See all articles by Michael Doran

Michael Doran

University of Virginia School of Law

Date Written: December 31, 2021

Abstract

Over the past twenty-five years, Congress has enacted several major reforms for employer-sponsored retirement plans and individual retirement accounts (“IRAs”), always with large bipartisan, bicameral majorities. In each case, legislators have claimed that the reforms would improve retirement security for millions of Americans, especially rank-and-file workers. But the supposed interest in helping lower-income and middle-income earners has been a stalking horse for the real objective of expanding the tax subsidies available to higher-income earners. The legislation has repeatedly raised the statutory limits on contributions and benefits for retirement plans and IRAs, delayed the start of required distributions, and weakened statutory non-discrimination rules – all to the benefit of affluent workers and the financial-services companies that collect asset-based fees from retirement savings. The result has been spectacular growth in the retirement accounts of higher-income earners but modest or even negative growth in the accounts of middle-income and lower-income earners. Despite the benign but misleading rhetoric about enhancing retirement security for everyone, the real beneficiaries of the retirement-reform legislation have been higher-income earners, who would save for retirement even without tax subsidies, and the financial-services industry, whose lobbyists have driven the retirement-reform legislative agenda.

Keywords: Tax policy, retirement policy, tax expenditures, legislation

JEL Classification: H24, K34

Suggested Citation

Doran, Michael, The Great American Retirement Fraud (December 31, 2021). Available at SSRN: https://ssrn.com/abstract=3997927 or http://dx.doi.org/10.2139/ssrn.3997927

Michael Doran (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

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