IRAs in the USA

Said goodbye to their families
Said goodbye to their friends
With pipe dreams in their heads
And very little money in their hands
--John Cougar Mellencamp

As I continue to ponder the pros and cons of putting any money into retirement accounts, it dawned on me that the rise of the IRA and 401(k) beginning in the early 1980s greatly facilitated increased debt and leverage in this country.

Prior to special retirement accounts, folks saved financial resources in plain old taxable accounts. Someday those resources might come handy for retirement. In the meantime, however, those resources could be applied toward current expenses. Folks were more liquid.

They also took less risk with these resources since they knew they needed them for a 'rainy day'--whether that be tomorrow or 30 yrs from now.

Today, as people divert more of their income toward retirement accounts, individuals have less resources set aside to cope with the vagaries of life in the present. As such, they're more prone to borrow resources to fill present day demands (e.g., houses, car loans, education, medical, etc).

Ironically, people also take more risk with these retirement assets than they would if they had them in taxable accounts.

I wonder whether retirement accts can't be viewed as intervention into the mkt for savings. The oversight which governs return amounts and timing distort decisions about saving.

Somewhat paradoxically, it seems, the more we create special vehicles for retirement resources, the less people actually save for retirement.

My growing sense is that if we shut down special retirement accounts tomorrow, saving would increase and leverage would decline.

Of course, an entire financial services industry built around managing these special retirement accounts would essentially collapse.