Center on Budget and Policy Priorities and The Retirement Security Project
This policy brief describes the steps that both the federal government and state governments can take to reduce an important barrier to retirement saving among low-income families: the asset tests in means-tested benefit programs. A growing body of evidence suggests that low-income families will contribute to retirement accounts if they are presented with effective and transparent incentives to do so and have easy access to a savings vehicle. The asset tests associated with means-tested benefit programs, however, often penalize those who do save, undermining the broader goal of encouraging retirement saving. Furthermore, the rules applied under these tests to retirement accounts are confusing and often treat 401(k) accounts and IRAs in a seemingly arbitrary manner.
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