I have a confession–I am the publicist for the most dangerous woman in America.
Well, at least, I am the publicist for her book, When I’m Sixty-Four: The Plot against Pensions and the Plan to Save Them. When we first discussed the promotion for this book, we did not anticipate a huge backlash against Teresa Ghilarducci’s proposal for Guaranteed Retirement Accounts. And yet, here we are, two years later, and still seeing vitriolic responses to GRAs and personal attacks on Teresa. But, a big question for me has always been, how many of these naysayers have actually taken the time to read Teresa’s book (bear in mind I know the sales figures for her book, so I know it can’t possibly be all of them!)?
I recently read Teresa’s thoughtful opinion piece in Bloomberg BusinessWeek (where they also featured her earlier this month in a Retirement planning feature), but I also read a horrible online petition that accused Teresa of wanting to “steal our 401(k)s,” so I asked Teresa if she would help clear the air with a quick Q&A (though really, you should still read her book –or try this excerpt first — where she presents the most complete argument for a GRA plan).
Q: Teresa Ghilarducci, do you want to steal my 401(k)?
I do not want to steal anyone’s 401(k). In fact, the idea that people want and deserve more choice in their retirement planning is what inspired me to create the Guaranteed Retirement Accounts (GRA) plan.
The disappearance of pensions leaves individual retirement accounts as the only option left, whether in the form of IRAs administered by banks or 401(k)s administered by employers. These policies may be the ‘last man standing’ in retirement accounts, but that doesn’t mean they are effective in providing Americans with a safe and secure retirement.
In reality, these policies – which cost American taxpayers $193 billion each year in lost revenue from tax breaks – are ineffective and regressive. For example, the vast majority of participants put less than $5,000 per year in their 401(k) and IRA accounts. Only the most wealthy individuals contribute the maximum – up to $42,000 per year over age 50. It follows that these individuals receive the maximum benefit from the plan; over three fourths of the tax breaks go to the top 20% of households. What makes these tax breaks especially wasteful is that these higher-income families are the most likely to save, even without the incentive of a tax break.
I think we can do better with our taxpayer dollars. That’s why I propose limiting the tax break to $5,000 per year and giving the remaining money – over $100 billion – to all Americans in the form of a $400 contribution toward a Guaranteed Retirement Account.
More after the jump.
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