How Will Higher Taxes Affect the National Retirement Risk Index

Publication Date: December 2010

Publisher: Center for Retirement Research at Boston College

Author(s): Alicia H. Munnell; Anthony Webb; Francesca Golub-Sass

Research Area: Economics

Keywords: savings and consumption

Type: Report

Coverage: United States

Abstract:

The National Retirement Risk Index (NRRI) measures the share of American households ‘at risk’ of being unable to maintain their pre-retirement standard of living in retirement. The calculations are based on the assumption that taxes remain at current levels. But federal government spending as a percentage of GDP is projected to increase rapidly in coming decades. To help bridge the gap between revenue and spending, policymakers could decide to substantially increase the personal income tax, raise Social Security payroll taxes, and establish additional revenue sources such as a value-added tax. This brief explores how such tax increases could affect the percentage of households ‘at risk.’