Limit on 401(k) Savings? It’s About Paying for Tax Cuts
- 7 years ago
Limit on 401(k) Savings? It’s About Paying for Tax Cuts
A proposal to slash the amount of money workers can put in tax-deferred retirement accounts set off alarms among savers and members of the financial services industry, who contend
that limiting the tax break would discourage contributions to 401(k) plans.
And depending on future tax law, Mr. Choi said that retirees with Roth accounts could get by with smaller contributions than those with 401(k)’s
because they won’t have to pay as much tax on the savings they withdraw
Nearly 40 years later, 401(k) accounts are the most common employer-sponsored retirement plans
and a raft on which millions of Americans hope to float through retirement.
Instead, workers were left with the responsibility of saving for retirement themselves,
with individual retirement accounts or 401(k)s. The switch has meant less security.
Details of the Republican tax plan have not yet been released,
but the talk has been of imposing a cap of $2,400 a year on tax-deferred contributions to 401(k) plans — a sharp reduction from the current ceiling of $18,000 a year for people under 50, and $24,000 for people age 50 and above.
After all, no one had previously used the unremarkable section of the tax code called 401(k)
to defer paying taxes on money that rank-and-file workers set aside for retirement.
Andrew Biggs, formerly a principal deputy commissioner of the Social Security Administration, said
that for most people, it makes little difference whether they pay taxes on retirement savings now or in the future.
A proposal to slash the amount of money workers can put in tax-deferred retirement accounts set off alarms among savers and members of the financial services industry, who contend
that limiting the tax break would discourage contributions to 401(k) plans.
And depending on future tax law, Mr. Choi said that retirees with Roth accounts could get by with smaller contributions than those with 401(k)’s
because they won’t have to pay as much tax on the savings they withdraw
Nearly 40 years later, 401(k) accounts are the most common employer-sponsored retirement plans
and a raft on which millions of Americans hope to float through retirement.
Instead, workers were left with the responsibility of saving for retirement themselves,
with individual retirement accounts or 401(k)s. The switch has meant less security.
Details of the Republican tax plan have not yet been released,
but the talk has been of imposing a cap of $2,400 a year on tax-deferred contributions to 401(k) plans — a sharp reduction from the current ceiling of $18,000 a year for people under 50, and $24,000 for people age 50 and above.
After all, no one had previously used the unremarkable section of the tax code called 401(k)
to defer paying taxes on money that rank-and-file workers set aside for retirement.
Andrew Biggs, formerly a principal deputy commissioner of the Social Security Administration, said
that for most people, it makes little difference whether they pay taxes on retirement savings now or in the future.