Study Questions Tax Breaks’ Effect on Retirement Savings

Every year, the government spends more than $100 billion on tax breaks to encourage Americans to save more for retirement. But a new study suggests such provisions may have little effect on the amount Americans save. …

The researchers – Raj Chetty and John N. Friedman of Harvard, Soren Leth-Petersen and Tore Olsen of the University of Copenhagen, and Torben Heien Nielsen of the Danish National Center for Social Research – looked at Danish data, in part because analogous American numbers are much less detailed. Although there is no way to know whether the patterns in Denmark and the United States are identical, the two countries have similar pension systems, and the new research fits with previous findings about how Americans save. …

The researchers conclude that tax breaks do not increase the overall level of savings by much, and do not tend to change the behavior of most workers – particularly the less wealthy, who often need the most help in preparing for retirement. [cont.]

Annie Lowrey, New York Times