Early Retirement

Study #298 - Does It Pay to Save?

Does it pay to save?  The answer is often no.  In fact, penalties for saving are astronomical for some households, particularly young, single-parent and lower-income families.  But these are the very people who need the strongest incentives to save for retirement.

Determining the effective marginal tax on additional saving is difficult because of the complexity of the tax code and the interaction of different government tax and transfer programs (such as food stamps) that are limited to households below certain income and asset ceilings.  Saving and wealth accumulation can put a family over an asset limit and cost thousands of dollars in lost benefits.