Alicia Munnell
speaker
25 appearances
1 recordings
1 series
first heard Feb 2019
last heard Feb 2019
Alicia Munnell’s voice in public audio — every appearance, attributed to the second.
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Appearances
WSJ Your Money Briefing · New Tax Law and Your 401(k): Should You Contribute More? · 22 Feb 2019
podcast
I'd say potentially playing a significant role.
The two big ways that people save for retirement are through their 401k plans or paying off their mortgages and building up home equities in their house.
And both of them are treated favorably under the tax code.
And my thought was that if you make housing less attractive, which is what the cap on state and local taxes does, then you may make 401k saving more attractive.
That's a really good point, because if people were equally likely to access their home equity as they were 401ks, I guess I wouldn't care which they save through.
But people are so reluctant to tap their home equity, either by downsizing or taking off a reverse mortgage or property tax deferral.
They just want to preserve their
home intact to leave it as a bequest or in case they need long-term care of some sort at the end of their life.
So they don't tap it.
Yeah, it's the same issue just in another way.
We were thinking about doing that before the cap was actually put on the state and local taxes and basically looking across the country to see if
And areas where people are investing a lot in their houses, whether they're saving relatively less in their 401k, of course, trying to, you know, hold constant things like education levels and wealth levels and income levels and all that kind of personal information.
So I'm sort of fierce on this notion that people should use their house as a retirement asset.
They're going to need to.
Social Security is not going to provide as much going forward as in the past.
401K plans are, the balances are relatively modest for middle income people and they're going to live for quite a long time.
And so I think tapping home equity is going to be essential.
And I just don't know how to get people to do it.
And so
So we're trying to think not only about this relationship between home equity and 401k saving, but just also trying to understand more fully the psychology of why people are so reluctant to tap their home equity.
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