A new report by the National Institute on Retirement Security highlights the insufficiencies of current tax incentives in ensuring retirement security for the middle class. It includes marginal tax rates, retirement plan participation and income distribution on retirement savings levels as culpable factors.

The report, “The Missing Middle: How Tax Incentives for Retirement Savings Leave Middle Class Families Behind,” also offers potential solutions that could enhance retirement security for middle-class families.

Saving for retirement is one of the biggest financial challenges most working Americans will face. While the vast majority will participate in Social Security, less than half will have their income replaced, the report says. Many workers will need to save for retirement through other vehicles.

Congress has passed a number of tax incentives to encourage saving for retirement, but due to the structure of the tax code, uneven levels of retirement plan participation and the growth of income inequality, many of the benefits of these tax incentives accrue to high-income earners, the report says.

“The middle class is left behind by the retirement savings system in key ways. Social Security replacement rates are too low for middle-class families to maintain their standard of living in retirement, but many middle-class households don’t reach the level of income and savings needed to truly benefit from the tax incentives for individual savings,” the report says. “This means the middle class too often is missing out in terms of benefiting from various retirement savings programs.”

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