The Tax Benefit of Income Smoothing

Written by: Kristian Rydqvist, Steven T. Schwartz, and Joshua D. Spizman Abstract A worker can contribute pretax dollars to a private pension plan. Under a progressive income tax, this feature reduces lifetime tax liability. There is a long-held belief that the tax benefit to postponing income tax liability until retirement is large. We find that the tax benefit of income smoothing under the United States 2010 federal tax code is…