Republicans Consider Sharp Cut in Pre-Tax 401(k) Contrib Limits (f*cking over Retirement savers)

[CousinIT]

Last edited Sat Oct 21, 2017, 01:00 PM - Edit history (1)

WASHINGTON — House Republicans are considering a plan to sharply reduce the amount of income American workers can save in tax-deferred retirement accounts as part of a broad effort to rewrite the tax code, according to lobbyists, tax consultants and congressional Democrats.

It is unclear if Republicans will ultimately include a cap on contributions in the tax bill that they are expected to release in the coming weeks. Such a move would almost certainly prompt a vocal backlash from middle-class workers who save heavily in such retirement accounts and from the asset management industry.

The proposals under discussion would potentially cap the annual amount workers can set aside to as low as $2,400 for 401(k) accounts, several lobbyists and consultants said on Friday. Workers may currently put up to $18,000 a year in 401(k) accounts without paying taxes upfront on that money; that figure rises to $24,000 for workers over 50. When workers retire and begin to draw income from those accounts, they pay taxes on the benefits.

Rumors have circulated for months that negotiators were debating including a cap as a way to help offset the revenue loss from a reduction in business tax rates that Republicans have put at the center of their plan. Reducing contribution limits would be, in effect, an accounting maneuver that would create space for tax cuts by collecting tax revenue now instead of in the future.

https://www.nytimes.com/2017/10/20/us/politics/republicans-tax-401-k.html

[Wellstone ruled]

1. You could see this coming.

Gary Cohn and his Wall Street Thieves have been playing with idea for years. This is the first Salvo in their Privatizing Social Security Benefits. Trillions for Wall Street Bankers. BTW,Roth IRA's contributions,at this time are front-loaded at a 28% Tax Rate. Go Figger.

[csziggy]

2. That makes 401ks insufficient for a retirement fund

Using this 401k calculator: https://www.fuzeqna.com/orangecountys/consumer/kbdetail_qaonly.asp?kbid=341

If you contribute $2,400 a year for 35 years, your cash investment is only $84,000. If the return on that money is 7%, your total would be $354,895. If you are lucky and your employer matches 50% of your contribution up to 6% of your salary, the total would be $458,160.

The assumptions are slightly ridiculous - 7% as a return has not been the rule since at least 2009. Few employers match as high as 50% any more.

Even so, $400,000 give or take $50,000 is not enough to support a single person for twenty years or so of retirement. If the worker is married with the Republican ideal wife who stayed home and never worked, then there is even less time they can afford to enjoy in retirement.