How Social Security Reform Could Benefit Those Disproportionately Affected by Retirement Tax Breaks

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With a Social Security crisis still looming, Congress must pass legislation to keep the Social Security trust fund from running out of money by 2034, based on projections reported by

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Some elements of reform encourage people to save for retirement on their own. But a new report from the National Institute on Retirement Security found that currently, more than half of tax breaks designed to encourage retirement savings through other vehicles, such as defined contribution (DC) plans and Individual Retirement Accounts (IRAs), disproportionately aid the top 10% of earners in the U.S. — not the middle class or lower-income wage earners.

Additionally, the report found that the top 30% of workers receive 89% of the “present value of tax benefits for DC plans and IRAs.”

“The Missing Middle: How Tax Incentives For Retirement Savings Leave Middle Class Families Behind” explores how Social Security does not serve the middle class. It has been shown to help reduce poverty amongst older Americans but does not provide adequate retirement income for the middle class.

Plus, because of marginal tax rates, the tax benefits received by saving for retirement through other methods help high earners more. Combined, these factors lead to inequities in retirement that are related not just to income but geography and race, the report showed.

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Potential solutions presented by the report include building on Social Security through benefit changes or by integrating lifetime income options for those who save outside the program. Reforming the tax aspects of retirement savings could also help incentivize retirement savings outside the Social Security system through tax benefits for the middle class.

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Finally, the report suggested that reducing abuses in the current Social Security system could help build the fund through federal tax revenue.

The NIRS is holding a free webinar exploring the top on Thurs., June 2, at 3 p.m. ET. You can register here.

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About the Author

Dawn Allcot is a full-time freelance writer and content marketing specialist who geeks out about finance, e-commerce, technology, and real estate. Her lengthy list of publishing credits include Bankrate, Lending Tree, and Chase Bank. She is the founder and owner of, a travel, technology, and entertainment website. She lives on Long Island, New York, with a veritable menagerie that includes 2 cats, a rambunctious kitten, and three lizards of varying sizes and personalities – plus her two kids and husband. Find her on Twitter, @DawnAllcot.
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