Tax Treatment of Personal Savings
Saving is a root source of economic growth because it provides
businesses with the investment funds they need to expand and
modernize. Saving also supports personal financial stability,
allowing people to cover large or unplanned expenses in the short
term while building a comfortable retirement in the long term.
However, broad-based income taxation penalizes saving compared
with current consumption because the return to saving is taxed but
consumption is not. Income taxes therefore encourage people to
spend their earnings now, rather than save for future needs.
This anti-saving bias is widely recognized, and most countries
with income taxes mitigate the problem with special rules for the
returns to savings. Our federal tax code includes, for example,
401(k)s, Individual Retirement Accounts (IRAs), and other vehicles
designed to reduce taxes on retirement savings.
However, all savings are beneficial, not just retirement
savings. Additional savings would allow families to cover health
care, education, and other large and sometimesunexpected costs more
easily. If Americans had larger pools of savings, they would be
more self-sufficient and less in need of government aid
As a complement to existing retirement savings provisions, the
U.K. and Canada created vehicles designed to encourage all types of
saving. These are called Individual Savings Accounts (ISAs) in the
U.K. and Tax-Free Savings Accounts (TFSAs) in Canada.
The tax treatment of ISAs and TFSAs is similar to that of
American Roth IRAs. Individuals deposit after-tax earnings into the
accounts, then earnings and qualified withdrawals are tax-free.
However, the British and Canadian accounts are much more flexible
than Roth IRAs and are far more popular, as discussed in the
following sections. Table 1 shows the basic rules for the
Table 1. Roth IRA vs. ISA and
U.S. Roth IRA
Saving for retirement
Saving for all purposes
Saving for all purposes
Individuals below set income limits
Annual contribution limit
£20,000 ($25,000 U.S.)
$5,500 CAD ($4,125 U.S.) Unused limit carried
Restrictions on withdrawals
Withdrawal of earnings before 59½ penalized
Note: exchange rates of 1.25 (U.K./U.S.) and 0.75
British Individual Savings Accounts (ISAs)
The U.K. has taken large steps to reduce the tax bias against
saving under its income tax. Dividends and capital gains benefit
from reduced individual tax rates and substantial tax-free
exemption amounts. The tax code also includes generous provisions
for retirement saving. British pension taxation is similar to U.S.
taxation of 401(k)s — contributions are deducted, then
pension income is taxed when received in retirement. British
pension saving is further favored with a tax exclusion on a
one-time withdrawal of up to 25 percent of pension assets.3
The U.K. government has also created favorable rules for
nonretirement savings. Margaret Thatcher’s Conservative government
introduced Personal Equity Plans in 1986 and Tax-Exempt Special
Savings Accounts in 1990, both of which allowed for after-tax
contributions to tax-free savings vehicles.
Tony Blair’s Labour government replaced those accounts in 1999
with Individual Savings Accounts (ISAs). The rules on these
accounts have been liberalized over time, and 21.7 million people
hold an ISA today, or 43 percent of all British adults.4
The tax treatment of ISAs is simple. Individuals contribute from
after-tax earnings, but then pay no taxes on interest, dividends,
or capital gains on the earnings. Savers can withdraw their funds
at any time, for any reason, without any taxes or penalties. Savers
can transfer their money between ISA fund managers easily. There
are no income limits for ISA eligibility and no lifetime limits on
deposits or tax-free earnings.
The annual contribution limit for ISAs is remarkably high. The
government recently increased it to £20,000, or about
$25,000.5 With this limit, ISAs have ended the
tax penalty on savings for all but the highest earners in the
The liberal rules on ISAs have made them popular, as shown in
Table 2.6 The ISA ownership rate of 43 percent of
adults compares with about 20 percent for Roth IRAs.7
The ISA contribution rate is higher as well. About 58 percent of
ISA owners contribute to their accounts each year, compared with
just 26 percent of Roth IRA owners.8
Furthermore, the British contribute more to ISAs than Americans
do to Roth IRAs. The average annual ISA contribution is about
£6,338 ($7,923), which compares
Table 2. Savings Account
U.S. Roth IRA
Adults with accounts (%)
Contributing each year (%)
£6,338 ($7,923 U.S.)
$6,292 CAD ($4,719 U.S.)
Sources: See endnotes in text.
to the average for Roth IRAs of $4,164.9 The British
experience with ISAs indicates that the public has a strong demand
for a general-purpose tax-free savings account.
ISAs are popular with people at all income levels. About 55
percent of all ISA holders have incomes of less than £20,000
($25,000).10 Relative to their incomes, lower
earners hold more in their ISAs than higher earners. For example,
the average account value for people earning between £10,000
and £19,999 was £19,538 in 2014, while the average for
those earning more than £150,000 was £64,148.11
The popularity of ISAs is not surprising. The accounts are more
liquid than retirement accounts because funds can be withdrawn at
any time without taxes or penalties. Liquidity is important to
people with moderate incomes because they are more likely than
others to face short-term contingencies that strain their
ISAs are a successful policy innovation, but the government has
added unnecessary complexities. A single ISA would be sufficient,
but the government created separate”cash” and”stocks and shares”
ISAs as well as a separate”junior” ISA for those under age 18.
In 2015 the government added a”Help to Buy ISA,” which includes
subsidies for home buying.12 In 2016, the government created
a”Lifetime ISA” for people under age 40 with an annual contribution
limit of £4,000. The government tops up Lifetime
contributions with a 25 percent bonus, thus adding a subsidy of up
to £1,000.13 Funds in Lifetime accounts can be
withdrawn tax-free after age 60 or for a home purchase, but other
withdrawals face a charge.14
The basic ISA is an excellent vehicle, but these other ISAs are
misguided. Governments should strive to create neutral treatment of
saving and consumption, but they should not subsidize saving or
favor some types of saving over others.
In sum, both Labour and Conservative governments have recognized
the importance of personal savings and supported the expansion of
ISAs. The basic ISA has an annual contribution limit more than four
times higher than the Roth IRA limit. Despite the unneeded
complexity, ISAs have been a success — as evidenced by their
Canadian Tax-Free Savings Accounts (TFSAs)
Like the U.K., Canada has taken major steps to reduce the tax
bias against savings under its income tax. It imposes reduced tax
rates on dividends and capital gains. It also has an employer-based
pension system as well as a popular individual pension vehicle, the
Registered Retirement Savings Plan (RRSP).15 The tax
treatment of RRSPs is similar to that of U.S. 401(k)s.
The government added TFSAs in 2009 to encourage savings for all
purposes, as a complement to RRSPs. The government envisioned a
typical user in different phases of her life: saving for a car in
her 20s, saving for a home in her 30s, saving for home renovations
in her 40s, saving for her child’s wedding in her 50s, saving for a
recreational vehicle in her 60s, and using the remaining account
balance for retirement income.16
Individuals can deposit up to $5,500 after-tax each year into
TFSAs. However, unused portions of the annual limits can be carried
forward if not used. If you contribute $2,000 this year, you will
be able to add $9,000 next year ($3,500 + $5,500). Beginning at age
18, all unused contribution amounts can be carried forward
indefinitely and used later.
All TFSA earnings and withdrawals are tax-free, and withdrawals
can be made at any time for any reason with no penalties. TFSAs
have no income limits. All adults can contribute and withdraw at
any time during their lives. TFSAs can be opened at any bank branch
or online. They can hold bank deposits, stocks, bonds, mutual
funds, and other types of assets.
TFSAs are hugely popular, with 54 percent of Canadian adults now
owning them.17 That is a much higher ownership rate
than the 20 percent for Roth IRAs — even though Roths have
been around longer. In 2014, 62 percent of TFSA holders contributed
to their accounts, compared with just 26 percent of Roth IRA
As with the British ISA, TFSAs are heavily used by
moderate-income individuals. In 2014, 55 per cent of TFSA holders
earned less than $50,000 Canadian ($37,500 U.S.).19
A spokesman for a major Canadian bank said,”The magic behind the
TFSA is in its versatility. It is not simply a tax measure designed
to help low-income Canadians, but rather a vehicle that can fit
almost every Canadian, regardless of income or stage of
Taking advantage of the TFSA’s ease of use and universal nature,
Canadian news media and financial institutions have extensively
marketed the accounts, which has helped promote a culture of
saving. An article in the Globe and Mail said,”TFSAs have
already become a great Canadian institution. It’s simplicity that
sells the TFSA.”21
Universal Savings Accounts (USAs)
Canadian- and British-style savings accounts may be coming to
America. Sen. Jeff Flake (R-AZ) and Rep. Dave Brat (R-VA) have
introduced companion bills — S. 323 and H.R. 937 — to
create Universal Savings Accounts (USAs).22
Under the legislation, anyone 18 years of age or older could
open a USA and contribute up to $5,500 in cash per year after-tax.
Account holders could make withdrawals tax- and penalty-free at any
time for any reason.
USA funds would be invested in bonds or equities, and would grow
tax-free. USAs would allow individuals to decide what to use their
savings for and when, without Congress micromanaging their choices,
as it does with current tax-preferred savings accounts.
The Flake-Brat legislation proposes USAs as an additional
vehicle alongside existing saving plans. However, a goal of current
Republican tax reform efforts is simplification. As such,
policymakers should consider replacing a number of savings vehicles
with large USAs. We suggest creating USAs with an annual
contribution limit of $10,000 or more, combined with the
elimination of traditional IRAs, Roth IRAs, and Coverdell Education
Savings Accounts (ESAs).23
Traditional IRAs generally allow a tax deduction for
contributions and then taxation of withdrawals in
retirement.24 The bulk of assets in traditional
IRAs come from rollovers, mainly from 401(k)s.25 Roth
IRAs allow for after-tax contributions and tax-free withdrawals
during retirement. The combined annual contribution limit for IRAs
is $5,500.26 ESAs have an annual contribution
limit of $2,000 per child, tax treatment similar to Roth IRAs, and
complex rules on withdrawals. All three types of accounts have
income limits, penalties for nonqualified withdrawals, and myriad
For savers, USAs are superior to these accounts because they are
simpler and more flexible. USAs could be used for retirement,
education, or saving for any other purpose.
The following sections discuss the advantages of creating large
Simplify Financial Planning. The
federal government micromanages personal finances by favoring some
types of saving over others. The result is a mess of separate
vehicles for retirement, education, and other purposes. Financial
planning would be simpler if people did not have to navigate the
rules and restrictions related to numerous separate accounts.
Large USAs would reduce complexity because they would hold all
savings other than employer-based retirement savings for many
families. Owning a USA would be as simple as owning a bank account,
which would encourage young people, people with moderate incomes,
and others to save.
Promote Personal Savings. The overall
U.S. personal saving rate was fairly high in the mid-20th century,
but it has fallen substantially since the 1980s.28 That
statistic and numerous surveys reveal that many Americans are not
saving very much. A triennial Federal Reserve survey, for example,
asks families whether they saved on net during the prior year, and
only about half answer affirmatively.29
Many people have not accumulated adequate savings for short-term
contingencies. A National Bureau of Economic Research study found
that about half of Americans could not come up with $2,000 in 30
days other than by pawning possessions or taking out costly
loans.30 One problem, the authors said, is
that although retirement savings are tax-preferred,”income earned
from emergency savings accounts receives no special treatment. To
the contrary, asset limits on many social programs actively
discourage low-income families from building up savings.”31
However, it is not just low-income families who are not saving.
The study’s authors found that”a sizable fraction” of seemingly
middle class people do not have adequate savings for short-term
Other surveys have similar results. An Employee Benefits
Research Institute survey found that 47 percent of workers had less
than $25,000 in overall savings and 24 percent had less than
$1,000.32 A poll reported in USA Today
found that 34 percent of adults had no money set aside for an
emergency, while 47 percent said their savings would cover their
living expenses for 90 days or less.33
There are likely many causes contributing to today’s often low
levels of saving.34 Changes in demographics and consumer
culture may have played a role, as well as the increased
availability of debt financing for purchases.
Government policy has also had an effect. The expansion of the
welfare state has reduced the perceived need for personal
savings.35 Also, the income tax is biased
against saving, as noted, and it encourages debt finance, as with
the provision of the mortgage interest deduction.36
In pursuing tax reform, policymakers should aim for neutrality
between saving and current consumption, while also removing the
advantages that debt receives. USAs would modestly help right the
balance. They might, for example, encourage more people to save for
purchases, rather than maximizing debt financing.
Increased savings would improve the ability of people to deal
with economic shocks, such as the loss of a job, health expenses,
or the cost of a major car repair. Savings can also increase
economic opportunity by providing funds to support further
education or start a business.
Many people currently get funds to cover short-term expenses by
withdrawing from, and borrowing from, their retirement
accounts.37 A blue ribbon commission on personal
savings reported last year,”Insufficient short-term savings can
lead workers to draw down their retirement accounts, incurring
taxes and (often) penalties. This ‘leakage’ of retirement savings
… jeopardizes many Americans’ long-term retirement
Pension experts Alicia Munnell and Anthony Webb studied the
leakage, and found that it reduced aggregate retirement wealth in
401(k)s and IRAs by more than 20 percent.39 The leakage
happens within an array of complex rules on retirement accounts
that govern which sorts of withdrawals are allowed and which are
Munnell and Webb would impose tougher rules to reduce leakage,
but that approach would make retirement accounts less attractive.
Leakage happens because people need their money now rather than
later. A solution would be to create a savings vehicle with tax
benefits similar to retirement accounts, but one that would allow
withdrawals without a mess of rules, penalties, and paperwork.
That was part of the thinking behind TFSAs. A Canadian bank
economist noted that TFSAs”can be accessed multiple times during
one’s lifetime to serve as emergency funds, and to bridge periods
of income volatility. This liquidity feature of the TFSA plan is of
great importance as it will probably work to limit or even
eliminate uneconomical behavior such as RRSP withdrawal.”40
Today, IRAs allow early withdrawals for hardship reasons,
education expenses, first-time home purchases, and some medical
expenses. But why should politicians be favoring some uses of our
personal savings over others? Why not have an account that allows
people to save and withdraw as they please?
As Munnell and Webb noted,”studies show that employees who know
that they can get access to their funds are more likely to
participate and to contribute more once they join the
plan.”41 That is exactly right — and it
is a big advantage of USAs. By providing maximum liquidity, USAs
would encourage more people to save and contribute as much as they
could to build their wealth.
Benefit People at All Income Levels.
Use of USAs would likely be more equal across income groups than
usage of current savings vehicles. Data for IRAs and ESAs show that
use is tilted toward higher earners. For example, 26 percent of
households with earnings of more than $50,000 have Roth IRAs,
whereas just 7 percent of families earning less than $50,000
Of course, lower earners have a tougher time saving because
their core expenses are high compared with their incomes. In
addition, lower earners face lower income tax rates, so they are
typically less interested in the tax-shielding benefits of savings
However, another issue is that low- and middle-income earners
avoid special-purpose savings accounts because of concerns about
liquidity. A Congressional Research Service study described this
issue with respect to ESAs:”the penalties for using educational
savings for non-educational purposes may discourage lower-income
families from having these accounts.”43 Since
children from lower-income families are less likely to attend
college than other children, the study notes, it is more risky for
them to use ESAs, and so fewer do.
USAs would solve this problem. They would allow moderate-income
families to save with no chance of being hit with penalties.
Discussing similar accounts proposed in 2003, former chair of the
Council of Economic Advisors Glenn Hubbard noted,”With no
withdrawal penalties, the account’s greater liquidity will
encourage individuals to save, particularly moderate-income
households worried about tying up funds for a long period of
Indeed, the British and Canadian experiences show large
participation by people of modest means. In the U.K., 55 percent of
all ISA holders have incomes of less than £20,000
($25,000).45 In Canada, 55 per cent of TFSA
holders earn less than $50,000 (U.S. $37,500).46 The
average TFSA holder earning $50,000 had an account worth $13,600 in
2014, while the average TFSA holder earning $100,000 had an account
worth about $15,000.47 As in the U.K., lower earners in
Canada save more in their accounts relative to income than do
Benefit People of All Ages. The main
savings vehicles in the U.S. tax code — defined-benefit
pension plans, 401(k)s, and IRAs — encourage retirement
savings. But to young people, retirement seems a long way off, and
their financial goals are more likely to include saving for
college, for a home, or for starting a business.
The Federal Reserve’s Survey of Consumer Finances shows
that”retirement” becomes the primary purpose people give for saving
only for age groups 40 and over.48 Younger people give a
range of other reasons, so USAs should be particularly attractive
USAs would also fill a void with the elderly, since the tax code
currently discourages their saving. Traditional IRAs and 401(k)s
require minimum distributions after age 70½ and do not allow
contributions. But why should frugal retirees be discouraged from
saving? They should have the option of keeping funds invested
without added taxes. Roth IRAs address this issue by allowing
deposits at any age, and USA accounts would expand on that
In the U.K., people of all ages use ISAs. In 2014, 21 percent of
young adults (age 18-34) made new ISA contributions, as did 27
percent of people in middle age (age 35-64), and 27 percent of
people of retirement age (65+).49
It is similar in Canada with TFSAs. In 2014, 23 percent of young
adults, 24 percent of people in middle age, and 33 percent of
people of retirement age made contributions.50
Complement Entitlement Reforms. In
coming decades, spending on Social Security, Medicare, and Medicaid
is expected to soar. If these programs are not reformed, the
growing costs will impose large burdens on future taxpayers.
Policymakers should overhaul the programs to reduce costs and limit
the economic damage.
In parallel, policymakers should pursue reforms to increase the
self-sufficiency of Americans and reduce the overreliance on
federal benefits. Reforms should include reducing barriers to
personal savings with USAs so that individuals can cover more of
their own costs for unemployment, retirement, and other life
Looked at another way, projections show that revenues will be
insufficient to pay promised entitlement benefits. Social Security
benefits, for example, are scheduled to be cut about 20 percent in
the 2030s when the program’s trust fund is exhausted. Actually,
benefits are likely to be cut before then as rising entitlement
spending pushes up federal deficits to crisis levels.
Thus, it is prudent for young people to increase their savings
so that they will be able to weather future entitlement cuts, and
so that they will be better prepared for negative shocks such as
recessions. Some people are more prudent planners than others, of
course, but USAs would provide a modest nudge to all Americans to
adopt a more frugal approach to their finances.
Current federal policies favor saving for some purposes over
others. But all saving is beneficial because it improves personal
financial security and provides funds for capital investment in the
economy. USAs would reduce the tax bias against saving in an
across-the-board manner for all individuals. The accounts would
encourage people to save for future expenses rather than relying on
debt and government aid.
British and Canadian experiences show that people of all ages
and income levels would use a general-purpose savings vehicle.
Those experiences also indicate that the financial industry would
embrace and promote USAs, thus helping support a broader savings
The Flake-Brat legislation to create USAs is on the right track.
However, the annual contribution limit should be increased to
$10,000 or more so that the accounts could cover all the
nonretirement savings that most people need. We think that the tax,
simplification, and liquidity benefits of USAs would generate their
widespread use across the USA.
Republicans,”A Better Way: Our Vision for a Confident America,”
June 2016, http://abetterway.speaker.gov.
bills are S. 323 in the Senate and H.R. 937 in the House.
framework benefits people whose marginal tax rate falls during
retirement, which is often the case in a graduated tax system. The
feature allows lifetime income smoothing. See Philip Booth and Ryan
Bourne,”Pensions Tax Reform: A Briefing,” Institute of Economic
Affairs, February 6, 2016.
Revenue and Customs, Individual Savings Account (ISA)
Statistics (London: National Statistics, August 2016), p. 27.
Data for 2013-14.
Treasury,”Tax and Tax Credit Rates and Thresholds for 2017-18,”
November 23, 2016. We use a pound-dollar exchange rate of 1.25.
2 data for the United States are from Investment Company
Institute,”The Role of IRAs in U.S. Households’ Saving for
Retirement, 2016,” ICI Research Perspective 23, no. 1
(January 2017); and Craig Copeland,”Individual Retirement Account
Balances, Contributions, Withdrawals, and Asset Allocation
Longitudinal Results 2010-2014,” Employee Benefits Research
Institute Issue Brief no. 429, January 17, 2017. Data for the U.K.
are from HM Revenue and Customs, Individual Savings Account
(ISA) Statistics. Data for Canada are from Canada Revenue
Agency,”Tax-Free Savings Account Statistics 2016 Edition (2014 Tax
Year),” October 13, 2016; and Bank of Montreal,”BMO Annual TFSA
Study,” February 23, 2017.
ownership for 2016, U.K. for 2013-14, and Canada for 2016. The
Investment Company Institute reports that Roth IRAs were owned by
17.4 percent of U.S. households in 2016. We estimate that equals
about 20 percent of U.S. adults based on ICI data on the share of
IRA and non-IRA holders who are married.
contribution rate for 2014, U.K. for 2013-14, and Canada for 2014.
Note that only 7 percent of traditional IRA owners contribute each
year, per data in Copeland.
average contribution for 2014, U.K. for 2015-16, and Canada for
HM Revenue and Customs, Individual Savings Account (ISA)
Statistics, p. 25. Data for 2013-14.
HM Treasury,”Help to Buy: ISA. Scheme Outline,” March 2015.
HM Revenues and Customs,”What You Need to Know about the New
Lifetime ISA,” February 17, 2017.
Some people want to integrate all ISAs into Lifetime ISAs and
harness them for retirement saving. See Michael
Johnson,”Introducing the Lifetime ISA,” Centre for Policy Studies,
August 2014. But that would eliminate the flexibility of ISAs and
would likely mean the end of the pensions tax relief system, which
allows income smoothing for those with fluctuating incomes. See
Booth and Bourne.
RRSPs can be either individual or group vehicles, with the latter
offered through employers.
Government of Canada, Department of Finance,”The Budget Plan 2008:
Responsible Leadership,” February 26, 2008, p. 79.
Bank of Montreal figure for 2016. The last government data were for
2014 and indicated 41 percent ownership. Thus, the bank figure may
be high, although TFSA ownership has been increasing.
Canada figure for 2014. Canada Revenue Agency, Table 1.
Ibid., Table 1C. We use a Canada-U.S. exchange rate in this
bulletin of 0.75.
CIBC,”New Tax-Free Savings Accounts Will Jumpstart Canadian Savings
Rate after Years of Decline,” News Release, September 11, 2008.
Rob Carrick,”How to Build a $1-million TFSA,” Globe and
Mail, April 17, 2016.
Chris Edwards and Ernest Christian proposed Universal Savings
Accounts in a 2002 Cato Institute bulletin. The George W. Bush
administration proposed similar Lifetime Savings Accounts in
There are numerous other tax-preferred savings accounts, including
SIMPLEs, SEPs, and 529 education plans. Congress should aim to
consolidate as many vehicles as possible to simplify financial
For traditional IRAs, the deductibility of contributions depends on
a person’s income and access to an employer plan.
Investment Company Institute,”The Role of IRAs,” p. 14. See also
Victoria L. Bryant and Jon Gober,”Accumulation and Distribution of
Individual Retirement Arrangements 2010,” Internal Revenue Service,
Statistics of Income Bulletin, Fall 2013.
The limit is $6,500 for people age 50 and over.
For ESAs and Roth IRAs, withdrawals of contributions can be made
any time, but withdrawals of earnings may be subject to taxes and a
penalty. For Roth withdrawals of earnings, individuals must
generally be 59½ and accounts must have been held five years.
The personal savings rate bottomed out about a decade ago, but has
a risen a bit since then. Measures of the personal savings rate
from both the Bureau of Economic Analysis and the Federal Reserve
show a drop over the decades. However, those indicators have
shortcomings. The Bureau figure does not include capital gains and
the Fed figure does not include unrealized capital gains, so both
miss a large share of personal wealth accumulation.
Jesse Bricker et al.,”Changes in U.S. Family Finances from 2010 to
2013: Evidence from the Survey of Consumer Finances,” Federal
Reserve Bulletin 100, no. 4 (September 2014), p. 13.
Annamaria Lusardi, Daniel J. Schneider, Peter Tufano,”Financially
Fragile Households,” National Bureau of Economic Research, Working
Paper no. 17072, May 2011.
Lisa Greenwald, Craig Copeland, and Jack VanDerhei,”The 2017
Retirement Confidence Survey,” Employee Benefit Research Institute,
Issue Brief no. 431, March 21, 2017, p. 12. Does not include the
value of homes or defined benefit pension plans.
Charisse Jones,”Millions of Americans Have Little to No Money
Saved,” USA Today, March 31, 2015.
Factors affecting the savings rate are explored in Thomas L.
Hungerford,”Savings Incentives: What May Work, What May Not,”
Congressional Research Service, June 20, 2006.
Solid evidence suggests, for example, that individuals reduce their
private retirement savings when government retirement benefits
increase. See Andrew G. Biggs,”An Agenda for Retirement Security,”
National Affairs 31 (Spring 2017): 21-40.
With regard to income taxes, empirical studies looking at the
relationship between savings vehicles and savings rates have
generated a wide range of results. For a summary, see Bradley T.
Heim and Ithai Z. Lurie,”The Effect of Recent Tax Changes on
Tax-Preferred Saving Behavior,” National Tax Journal, June
About one-fifth of eligible 401(k) holders have had a loan
outstanding in recent years.
Bipartisan Policy Center,”Securing Our Financial Future: Report of
the Commission on Retirement Security and Personal Savings,” June
Alicia H. Munnell and Anthony Webb,”The Impact of Leakages from
401(k)s and IRAs,” Center for Retirement Research at Boston
College, Working Paper no. 2015-2, February 2015. See also Anne
Tergesen,”Firms Curb Raids on 401(k)s,” Wall Street
Journal, April 3, 2017.
CIBC,”New Tax-Free Savings Accounts.”
Munnell and Webb, p. 17.
Investment Company Institute,”Appendix: Additional Data on IRA
Ownership in 2016,” January 2017, p. 5.
Hungerford, p. 12.
Hubbard was talking about Lifetime Savings Accounts proposed by the
George W. Bush administration in 2003. Like USAs, those accounts
would have been funded with after-tax contributions, and allowed
for tax-free withdrawals at any time for any reason. Quoted in
Tyler Cowen,”The Case for Lifetime Savings Accounts,” Marginal
Revolution, January 20, 2004.
HM Revenue and Customs, Individual Savings Account (ISA)
Statistics, p. 25. Data for 2013-14.
Canada Revenue Agency, Table 1C.
Ibid., Table 3C.
Cited in Investment Company Institute, Fact Book, 2016, p.
134.49 Authors’ calculations based on HM Revenue and
Authors’ calculations based on Canada Revenue Agency data.