A new report by the Center for Retirement Research at Boston College found that large tax expenditures don't entice households to increase their retirement savings. Instead, automatic saving options like auto enrollment and auto escalation do much more to get passive savers to participate.
The federal government provides generous tax subsidies for retirement saving in 401(k) plans and IRAs designed to increase household saving and retirement income security, according to the report. The cost to the Treasury exceeds $100 billion a year in lost revenue.
"Given the nation's severe budgetary pressures, it is critical to know how effective these subsidies are in raising household saving and whether other approaches would be more cost-effective," according to the authors of the report.
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