Enhancing Retirement Wealth and Reducing Retiree Inequality: Emergency Savings Accounts and Other Policy Options

Abstract

US retirement savings and household wealth vary widely, and the shortfalls for lower- and moderate-income households and disadvantaged demographic groups could be reduced by automatic enrollment payroll deduction emergency savings, increased retirement savings coverage, an enhanced saver’s tax credit, and simplified portability of accounts. Based on early data, it appears likely that having and using even modest amounts of emergency funds improves household balance sheets over time. And simulations suggest that universal Automatic IRAs – including emergency savings – for workers without employer plans could increase household assets for all age and income groups, especially Blacks and Hispanics.

Keywords: wealth inequality, retirement saving, automatic enrollment

JEL Classification: D14, J26, J32, J71