The High Cost of Nudge Economics and the Efficiency of Mandatory Retirement Accounts
Authors: Daniela Arias, Daniel Samaan and Teresa Ghilarducci
Date: November 10, 2009
This paper compares three ways to promote more retirement security through the tax code: (1) the current system of tax deductions for 401(k) and IRA-type plans; (2) the auto-IRA proposal linked to the Obama administration, which is based on a public policy framework colloquially known as "nudge economics," and (3) subsidized mandatory accounts called Guaranteed Retirement Accounts (GRAs). The focus is on how the three methods promote efficiency and how tax expenditures for retirement accounts can achieve public policy goals for the least cost.