General Discussion
Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsAs the GOP looks to cut taxes, your 401k may bear the cost
I gasped when I read this week that House Republicans may tinker with the hugely popular 401(k) retirement benefit as part of their tax reform package.
Politico reported that one proposal under consideration would be taxing the money that workers place into their 401(k) savings plans up front instead of imposing the tax when they take the money out in retirement 20, 30 or 40 years hence.
The idea would raise billions of dollars, presumably by removing the deduction that 401(k) savers get by taking $18,000 off the top of their salary before income tax kicks in. People over 50 can put in another $6,000, called a catch up contribution, also tax free.
In effect, Congress would be converting 401(k) plans going forward into something resembling the Roth Individual Retirment Account.
http://www.msn.com/en-us/money/retirement/as-the-gop-looks-to-cut-taxes-your-401k-may-bear-the-cost/ar-AAr3m0a?li=BBnb7Kx&ocid=edgsp
They don't want to keep a deduction that benefits the average Joe.
exboyfil
(17,865 posts)I do not expect to be wealthy in retirement. I have 8x my current salary in my IRA/401(k) - all of it tax deferred. I don't mind paying taxes so long as I have enough income to live on.
I always suspected that the Roth treatment down the road would not be as advantageous as individuals think. I suspect that it will ultimately roll into Social Security eligibility (either through taxes like currently or outright by means testing).
I hope they don't make this change. It has served as a strong incentive for retirement saving (company match is also an effective incentive).
Wellstone ruled
(34,661 posts)That same idea floated years ago,but the Rethug focus shifted to destroying Unions first to get rid of their Pension funds through creative rules and regs. The Chatter has always been,once they,meaning wall street,kills the defined Pension Program,they will go after the 401's.
This the one of the largest pools of funds that Wall Street has not jacked the crap out of yet. But,they keep trying. Next will be Social Security so called Trust.
Hoyt
(54,770 posts)I haven't been following this closely, but last I saw Trump was supposedly considering a big increase in the standard deduction. If that happened, then the tax deference of the 401(k) plan might be a moot question -- except for some psychological benefit -- for many of those people on the lower end of the income spectrum who still manage to make 401(k) contributions.
At this point, who knows specifically what this so-called Administration is proposing, there have been so many rumors and trial balloons; however, I'm betting it's a big cluster-screwing for most people and the country.
mn9driver
(4,429 posts)is that most people can deposit money that would have been taxed in a higher bracket during their working years, and withdraw it and pay taxes on it in retirement, when they are in a lower tax bracket.
The only people that benefit from a Roth style retirement savings plan are those who expect to remain in an equal or higher tax bracket in retirement. I.E. the 1%.
Squinch
(51,084 posts)Zorro
(15,756 posts)johnsonsnap
(56 posts)We can't afford to. Increasing it only helps the wealthy.