Retirement savings plans are not universal. Only 55 percent of Americans working full time have a retirement savings plan. Part-time workers and the poor fare worst.

A universal 401(k) plan is proposed that would spread these tax benefits more evenly and encourage more Americans to save. Just like the current 401(k) plans, the assets would be protected from creditors, the account would be attached to the individual and thus be portable, and penalties would discourage early withdrawal.

A current proposal is to address income inequality whereby the federal government creates tax-free retirement accounts for lower-income Americans, supplementing private accounts where they already exist, and matching personal contributions to those accounts. To encourage funding, the amount of the match by the government would depend on the income of the family and how much they save.

For every dollar spent on the universal 401(k), the federal government could spend one dollar less on Medicare and Social Security benefits. This makes the reform is revenue-neutral. It would not increase tax rates on Americans. In the longer run, the increased savings and investment would help pay for money to the poor.

This moves us closer to President Bush’s vision of an ownership society. Income inequality is addressed and the poor get more incentive to save upfront. Long-run gains are greater for the poor through the returns be placing an incentive to prioritize a savings discipline. Historically, equity returns have far exceeded what banks pay on checking accounts and savings accounts.

In our opinion, encouraging low-income savings is a fine initiative given the penalties for early withdrawal are exceptionally stiff.