Savings Incentives for Low- and Middle-Income Families: A New Report From the Retirement Security Project

This path-breaking new study, conducted by H&R Block and economists from the Retirement Security Project, MIT, Harvard and UC Berkeley, examined 15,000 H&R Block tax filers in 60 offices in the St. Louis area. The tax filers were randomly offered no match, a 20 percent match, or a 50 percent match on contributions made to a new or existing IRA. The study represents the first large-scale randomized experiment on the effects of match rates on participation and contributions to retirement accounts.

The study reaches two broad conclusions. First, higher match rates significantly raise IRA participation and contributions. Average IRA contributions (excluding the match) for the 20 percent and 50 percent match groups were four and eight times higher than in the control group, respectively. Second, several additional findings suggest that professional tax assistance, information provision, and ease of saving can play important roles in encouraging IRA contributions among low- and moderate-income families.

Taken together, the results suggest that the combination of a clear and understandable match for saving, easily accessible savings vehicles, the opportunity to use part of an income tax refund to save, and professional assistance could generate a significant increase in retirement saving participation and contributions, even among moderate- and low-income households.

At this briefing panelists will discuss the broad conclusions of the study and its implications for low-and middle-income households across America.