There's talk of capping 401(k) contributions at $2,400 per year

[RandySF]

Last edited Sat Oct 21, 2017, 10:16 PM - Edit history (1)

Proposals floating around Washington to cap the amount that Americans can contribute before taxes to 401(k) plans and individual retirement accounts are unsettling professionals in the retirement industry.

Republicans are looking for ways to generate revenue to support broad reductions in individual tax rates. One idea is to limit the amount of pretax money households can sock away for retirement saving. Such a move would likely generate significant political blowback but it hasn’t been explicitly ruled out, stirring worry among industry lobbyists.

Members of the House Ways and Means Committee are widely expected to release a version of the tax bill by mid-November. Specifics on a wide range of issues remain unclear. Emily Schillinger, a spokeswoman for the Ways and Means Committee, declined to comment.

Lobbyists and others in the retirement and financial services industries who have spoken to congressional staff and committee members say lawmakers are looking at proposals that would allow 401(k) participants to contribute significantly less than what is currently allowed in a traditional tax-deferred 401(k). An often mentioned amount is $2,400 a year. It isn’t clear whether that would only apply to 401(k)s or IRAs or both.



https://www.marketwatch.com/story/theres-talk-of-capping-401k-contributions-at-2400-per-year-2017-10-20

[spooky3]

1. A proposal that is magnificent in its stupidity. Americans need MORE, not less, encouragement and

help in saving for retirement.

Of course, because the financial services industry has a very strong lobby and would be highly unlikely to want some of their revenue taken away, this is a provision that probably has NO chance of surviving in the bill.

[RandySF]

3. I know exactly what they'll say

"You can retire with the money you save with your tax cut." Watch for this.

[KY_EnviroGuy]

21. Some may also tend to put more into the "wild west" stock market.

Not able to invest more in solid 401K funds, many people may be tempted to play the market themselves. Perfect fodder for the 1% to suck us dry again.

Many of us who were very busy working in the 90s but tried playing the market on the fly learned that lesson the hard way.

[Hamlette]

59. most 401K go into the market,

and people who have invested in it have done very well. And you can put your own money in comparable "solid funds" if you want.

[grantcart]

53. It is the Mona Lisa of stupidity.

[JDC]

2. Work until you die. -Signed GOP

[Lint Head]

4. These assholes want civil slaves.

[Eliot Rosewater]

5. Citizens with enough money to make them somewhat comfortable

are more likely to notice lying traitors in the WH and take the time to go out and vote against them

People who are barely surviving, the state they want us in, dont have time for such luxuries.

[RandySF]

28. What's really sad.

Some of the lower income Trumpkins are on social media calling 401k's a "tax haven for the rich".

[Xolodno]

72. ...and it gets worse.

These are the same idiots who plan to rely on Social Security and Medicare.....and advocate cuts to it. They think they are cutting everyone who is living better than them and minorities. It doesn't dawn on them that its across the board.

So in addition to slitting their own throats...they are trying to slit everyone else's.

[RandySF]

73. The Republican Party's greatest accomplishment...

was convincing poor whites into thinking it's better to tear down the middle class instead of voting for a country that lifts everyone up.

[Xolodno]

75. Well...yeah...

A sizable middle class is "communism", everyone is equally poor....with no chance to get rich, so get rid of all the programs that lazy people use to suck off of the government tit. But if you work hard, you can get rich! And if your not, its because your'e not working hard enough! Don't you know these rich guys worked 16 hour days, including Saturdays, on Sunday went to Church, saved all their money instead of buying the latest iPhone, etc.

[Eliot Rosewater]

89. Sarah Silverman new HULU show "I love you America"

She goes and visit typical lower middle class white folks who think Obama was born in Kenya and that he gave away goodies to black people.

Then Sarah asks how they get healthcare, ACA or medicaid for all of them.

I think we are too dumb to survive in our current configuration. We had good things but we dont deserve them , they need to be taken from us and then maybe not ONE person who claims to be a progressive or liberal will ever not vote for any democrat in November.

I dont really mean that because half of us DONT deserve it, but I am still very very very angry at people who bad mouthed HIllary.

I will never get over it

[roamer65]

6. If they get this passed, next step is...

conversion of existing 401k’s into after-tax Roth style IRA’s. In other words, they will go in and levy taxes against them during the conversion. Basically, partial confiscation of your 401k.

There are trillions in 401k’s and they want it for tax cuts for the wealthy.

[smirkymonkey]

7. Rotten bastards.

When will this stop? Their goal is the complete decimation of the middle class. They want to turn us all into slaves.

[Irish_Dem]

8. Along with cuts to Medicare. They want us destitute when we retire. nt

[unblock]

9. Just to be clear, the same total contribution limits would remain

They're "only" talks by about limiting contributions to pretax 401(k)s. Amounts above $2,400 would have to go into a post-tax Roth 401(k).

Obviously, that's a problem for the many people who don't have spare thousands of savings to pay taxes now on income they won't receive until years or decades later, but it's something. well, at least for those better off....

[RandySF]

10. So my taxes go up.

Wonderful.

[unblock]

13. Your taxes would go up now, but be lower in retirement.

Some would win, some would lose. It depends on whether your tax rate would anyway be higher or lower in retirement.

The biggest winners (surprise, surprise) would be the rich people who will have high taxes in retirement anyway. Especially if their tax rate is higher in retirement, they gain by paying taxes now at a lower rate and also by getting all the interest and gains tax-free.

If you expect your taxes to be much lower in retirement (like most of the middle class), then a Roth 401(k) isn't a good idea. The growth is still tax-free, but you're better off waiting to pay taxes at the lower rate.

[roamer65]

17. No guarantee they will be lower in retirement.

The tax brackets could be much higher then, especially as interest on the debt swamps the federal budget.

[unblock]

18. Forecasting is always dicey, but yeah.

And tax rates are now comparatively low, historically.

The question is, will *your* marginal tax rate be lower, when you're in retirement drawing something like 80% or less (possibly a lot less) than your usual pay.

[Demsrule86]

81. 401 K's are all that is left...since pensions have been pretty much destroyed....another gift from

George Bush (thanks Nader) when a right wing court allowed pensions to be taken away after the fact. The 401 K thing is huge. Most middle class Americans have one...some jobs match too. It would also hurt Wall Street and no doubt cause another recession...since you get no interest at banks these days...this would starve Americans in retirement...of course they were willing to sell the bullshit globalism idea where we actually agreed with losing our jobs to enrich the few rich asshats like Trump and Romney...and impoverish a nation.

[roamer65]

11. Its a huge tax increase on the middle class.

Many have used their 401k to reduce their taxable income during their years in the higher tax brackets.

They want to use this change to finance their cuts for the 1 percenters and big business.

They know they are going to lose in 2018 and they want this change before that switch takes place.

[RandySF]

12. Exactly

We need a financial tutorial here on DU for the many users who assume only the wealthy are investors.

[roamer65]

16. Due to its $18k cap, 401ks are a specific middle class savings vehicle.

Those high income earners who easily max out their 401k contributions employ other tax deferment vehicles out of reach to us peons. Like Mr. 14 pct tax bracket Romney for instance.

Hundreds of billions flow into this system yearly. If they screw it up, we wil be staring a worldwide economic depression right in the face when the flow of these funds dry up. In other words, a MASSIVE liquidity crisis.

[Igel]

24. When talking tax brackets,

I've always tried to compare the same kind.

I make a lot less than Romney, to be sure. But my family's tax bracket, the effective tax rate--and we're at the 79th or 80th percentile--is around 5%.

My "official" tax bracket, the highest tax rate I pay on any of my income, is 35% ... I think. Not that it matters.

And Romney has ways to defer taxes, average taxes, shelter income. Me? No. At least not nearly as much.

Most of the discussion insists on comparing marginal, official rates for lower-income people like me against effective tax rates. So I pay 35%, but Romney only pays 14% ... so I pay more taxes. (Right. Even at 35% on all my income I'd be paying < $40k, and 14% on his income is far, far more.)

[fescuerescue]

30. Anybody who can put away $18k a year isn't middle class

That's upper class folks.

[GulfCoast66]

33. Wrong

I do and am middle class. Modest house paid for and no kids. Drive a 12 year old truck.

[fescuerescue]

42. Well you can still save as much as you want to.

Just need to pay your fair share of taxes on it.

[GulfCoast66]

45. You suggesting I do not pay my fair share?

I choose to save. I am not one of the hated millionaires or billionaires. But if I keep saving I might have a million before I retire.

And the reason they want to make this change is to give the rich a tax cut.

I would gladly pay more if they raised taxes on the rich. But if the different levels of the middle class start fighting over who pays what we are sunk.

[fescuerescue]

60. not at all

I'm sure you simply follow the tax laws as they exist.

Having said that, if you are on track for a million - I suspect you can spare some for the less fortunate.

[GulfCoast66]

65. I am comfortable with what I do to help the less fortunate.

More importantly, unlike republicans, I support policy that will make it possible for all citizens to aspire for a comfortable retirement.

Higher minimum wage.
Way more laws strengthening unions.
Universal health care so no one goes bankrupt from illness.
Returning to the days when stock options could not be used to pay CEO.
Return of tax rates of the 60s even if that raises my taxes.

I could go on but you get the picture.

The 401k helps the middle class. Weakening it does nothing to get at the 1%. In fact they would love it to be weakened so they can get a larger tax cut.

I respect your passion and hope you are having a nice weekend.

[TexasBushwhacker]

36. Perhaps, but plenty of middle class people can afford to save more than $2400

They're reducing the limit by more than 85%. Ridiculous!

[GP6971]

51. You're flat out wrong

I'm middle class and over the years have been able to gradually increase my contribution %. Not so easy for those entering the work force or in mid-careers though.

[NickB79]

58. My wife and I come close to that on $80K gross income

While paying a mortgage and raising a child. Is that upper class?

[fescuerescue]

61. If you have enough extra income to set aside $18k a year

While paying a mortage and raising a kid, then you have some very nice resources.

[Drahthaardogs]

69. Or you live BELOW your means

Which is the real secret to being able to save.

[A HERETIC I AM]

79. ......

https://www.democraticunderground.com/?com=forum&id=1121

[JustAnotherGen]

80. That's what mine is for

And my Company has matching funds.

I put money in my 401k knowing it could go belly up. I also put it in there for a tax deduction.

[MichMary]

14. Wait, I thought

we hate 401k plans. Pretty sure I read it here.

[RandySF]

15. You never heard that from me.

[TexasBushwhacker]

38. 401Ks of today are often not as good as pensions of the past n/t

[GulfCoast66]

46. But they are often better.

We should work to bring back pensions and allow more people make enough to actually save over $2400 a year.

[Thrill]

19. Of course because the rich dont need it

[krispos42]

20. How about we put a limit on the mortgage interest deduction?

Like, you only can get it for ONE mortgage? Not for your house and your vacation home and your other vacating home.

Oh, and how about some kind of ceiling on the dollar amount? Say, $18k per year?

Keep it strong for the middle and working class but so rewarding people buying McMansions and estates.

[roamer65]

23. Got my vote.

Also go after the baby subsidy. 2 kids, that’s it. Beyond that you have them on your own nickel.

I don’t we should be subsidizing extra carbon footprints.

[Igel]

25. Do you think that's right for TANF and other programs, too?

After all, many families get far, far more than a $1000 (refundable?) tax credit each year for their 3rd, 4th, 5th kids.

No? You don't agree. Neither do I.

But I don't see a big difference between the two.

[roamer65]

31. I believe government policy across the board should encourage smaller families going forward.

TANF included, 2 is enough. For the wealthy there should be tax penalties for children beyond 2.

I saw a presentation on how India is handling it. They are now down to an average of 2.2 children per family. Kudos to them.

[TexasBushwhacker]

39. Hardly anyone gets TANF anymore anyway

EITC only pays more for up to 3 children. SNAP goes up for every additional household member.

[HeartachesNhangovers]

44. If you can actually write off interest on a

SECOND home, that's BS and needs to be eliminated now. I don't need to be subsidizing anyone's investment or recreational property.

[Rollo]

50. There already is a ceiling on the mortgage deduction...

I believe it starts getting eliminated at mortgage values of $1 million. And there may be income limits as well. There's been some talk of reducing that limit to $500k.

It wouldn't bother me much because my home is worth much less than that, and is nearly paid off.

There is some talk that the mortgage interest deduction has had the net effect of inflating housing prices. Oddly that didn't seem to be the case in 2009... and if it is inflating home prices, the unintended consequence of limiting or eliminating the mortgage interest deduction may be to send lots of newer homeowners under water and perhaps making them homeless.

In a sense there is little that can be done with tax reform without pissing off one or the other group. And most people don't see giving some other group a deduction effectively increases their own tax burden. So we have lots of tax deductions that have multiplied over the decades, and it's politically far more difficult to remove a deduction than to grant it.

Trump can either piss off his base, or please his puppet masters.

[KY_EnviroGuy]

22. Get your running shoes on.

For the race to the bottom. They're planting all the seeds now.

Just make sure those shoes are good enough to be buried in.

[Rollo]

26. They should raise the IRA contribution limit to match that of the 401k

[RandySF]

27. The limitation may include ira's.

[Rollo]

32. There should be no decrease in either 401k or IRA. Instead the IRA limit should be increased to...

...$18,000/yr or match current 401k levels.

[TexasBushwhacker]

40. I agree. 401Ks often have employer contributions

I've never understoid why contribution limits on IRAs are less.

[Rollo]

48. It's probably because the working class has no lobbyists...

[fescuerescue]

29. Fine by me. It's just a way for the 1%'ers to lower the tax burden anyway

For most people $2400 a year is about average.

We need more tax revenue. Not less and cutting the amount the wealthy can hide is good.

[Rollo]

35. NO! The 401k or IRA deduction is not just for wealthy!!!

Last edited Sat Oct 21, 2017, 10:51 PM - Edit history (1)

The 401K limit should stay at $18k or whatever increase and the IRA limit increased to same.

I am NOT wealthy, I make less than $60k/yr. I don't work for a big corporation so I don't get ANY 401k opportunity. All I got is the IRA, and the $6500 limit is insufficient adequately to contribute to my retirement funds.

Please stop trying to punish the working class for the sins of the 1%.

[RandySF]

64. This is what Republicans are trying to do.

Last edited Sun Oct 22, 2017, 01:25 AM - Edit history (1)

They went the working poor Wisconsin and asked "if you don't have benefits, why should public employee unions unions?". And instead of helping to pull everyone up, they let the poor and middle class tear each other apart.

[Rollo]

68. No, the GOP is not trying to increase the IRA limit to same as the 401K limit!!!!!!!!!!!!!!!!!!!!!!!

[RandySF]

71. I mean they are pitting the poor and middle class against each other.

[A HERETIC I AM]

78. An IRA is not your only vehicle

All I got is the IRA, and the $6500 limit is insufficient adequately to contribute to my retirement funds.

There is nothing stopping you from opening a regular investment account and putting as much as you want into it. You’ll just have to pay taxes on the gains every year. You could however, seek tax free investments like Municipal Bonds or other tax deferred securities you could purchase in such an account

[Rollo]

87. What makes you think I haven't done that, too?

But it involves needing a higher IRA contribution limit to offset the annual profits from a regular investment account.

Tax-free muni bonds are all well and good, but the low yields are not particularly attractive for the past decade.

Again, why are 401K contribution limits set so high (18,000 to 24,500 for seniors) but IRA limits relatively low (5,000 to 6,500 for seniors)??? I have had 401k plans before and they are a great ways to offset income, even without an employer match, but I fail to see why a nation where most people are employed by small businesses tries to penalize them for not working for a big company with a cushy 401k plan.

Even the self-employed can get an IRA with a higher contribution limit than regular employees for companies without 401k plans.

It makes no sense.

[RandySF]

37. Bullshit

Many workers have 401k’s as their only retirement plan. This is a tax hike on the middle class.

[roamer65]

49. Then close the tax loopholes for the wealthy.

This is shifting the tax burden onto the middle class.

[fescuerescue]

63. I'm all for closing tax loopholes

Bear in mind that I can neither change the 401k, or close other loopholes.

I'm just commenting on my reaction to such a notion.

[GulfCoast66]

52. No everyone making more than you is the 1%

The 401k is exclusively designed for the middle class. The rich have more creative ways to shelter income and the 401k amounts are chump change to them.

[fescuerescue]

62. Actually the wealthy use the 401k as a tool to shelter millions

Romney is a good example.

[GulfCoast66]

66. Incorrect. 18k is the limit of tax deferred income

After that it gives you no tax protection and is just a post tax investment plan.

18k is a long weekend for folks like Romney

[fescuerescue]

83. There are loopholes

Google "carried interest" and "romney" and "401k"

literally millions.

[GulfCoast66]

88. Are sure you are not meaning an IRA?

Because to have a 401k means you have an employer giving you a paycheck. That hardly fits Romney.

[fescuerescue]

90. thats a trivial restriction actually

Even company owners pay themselves via a paycheck...especially wealthy company owners. As a matter of fact, the IRS requires that someone who runs a company draw a paycheck from it (and have taxes deducted). Otherwise, the owner would draw all their pay via distributions and avoid payroll taxes.

(btw - passthrough pay, or distributions is something that Trump is trying to open up more, but that's another conversation)

There are also solo 401k's which have all the same loopholes as IRA.

[RandySF]

77. Investing 101

A 401(k) is a retirement savings plan sponsored by an employer. It lets workers save and invest a piece of their paycheck before taxes are taken out. Taxes aren’t paid until the money is withdrawn from the account.

[fescuerescue]

84. Vey good! Now lets skip ahead to Investing 404

https://www.reuters.com/article/us-usa-campaign-romney-ira/how-did-romneys-ira-grow-so-big-idUSTRE80N04E20120124


Romney’s IRA, valued at between $20.7 million and $101.6 million, as reported by The Wall Street Journal last Thursday, holds stakes in 13 investment entities run by Bain Capital, the private-equity firm he cofounded and led for 13 years.

[tammywammy]

86. An IRA is not the same as a 401k. n/t

[Ilsa]

34. I may have to use my extra income to buy guns at a pawn shop

for the upcoming revolution.

[KentuckyWoman]

43. This would be revenue neutral. Where does Trump Inc make money?

Middle class will sink it into real estate for the deductions instead. People have this crazy idea that their primary home is a savings vehicle. It isn't 99% of the time but it's still what people think.

Banker dudes and real estate.... they will gain handsomely as will the hedge fund weasels.

All it will do it force people to change where they put money. Revenue for the Feds is a non-issue.

by the time Ferret Head leaves we'll have another real estate bubble....the predators will keep cashing in and the rest of us will be holding the bag of turds.

[Turbineguy]

54. I think Wallstreet

will lobby against that. Retirement funds are a favorite target for the looters Ayn Rand did not warn us about.

[DonCoquixote]

55. remember when 401ks were going to be better than pensions?

The same old bait and switch, to shovelmore money into the furnaces of those who cannot od jack with what they have, save buy caviar

[doc03]

56. So the Republicans eliminate the Defined Benifit Pensions and push the 401k

as a better retirement account now put a ridiculous low limit on what you can deposit. They are
determined to make us work until we are dead.

[mcar]

57. So much for help for the middle class

[tritsofme]

67. I am fairly confident they will never do this, or eliminate SALT deductions.

Even if this the GOP leadership’s preferred plan, backbenchers (facing summary execution at the ballot box) would revolt, and with the bill presumably receiving zero Democratic votes, it would die like the rest of their “agenda” so far.

[jmowreader]

70. No. It is not to "support broad reductions in individual tax rates"

It is to cut taxes on millionaires. Everyone in the country who makes less than a quarter-million will see an increase in their taxes...for instance, count on your health insurance premiums to come out of after-tax income, not pre-tax income like they do now. Expect alimony payments to be double-taxed - right now, the alimony payor subtracts the payments on Line 31A, and the recipient declares them as income on Line 11. The recipient will still count them as income, but in the name of "tax simplification" Line 31A will go away. "Gee pal...if you didn't want to pay taxes on the alimony you are paying then you should have stayed married." I've already written about the atrocity that is Trump's plan for itemized deductions.

I wonder...can I incorporate myself? If I declared myself a Personal Services Corporation, how much of a tax break could I expect?

[Hekate]

74. Wow. Enforced poverty at the end of life. Social Security under threat, company pensions wrecked...

What the hell is this for a freaking joke?

[bdtrppr6]

76. i'll keep my "wealth"

in cash inside a bunch of mason jars buried in backyard. much safer and much greater growth. it'll grow a money tree! whoopee!

[extvbroadcaster]

82. Trump and the GOP want to take everything

They don't want average people to have anything. They want you to work until you die. I am close to retirement age but I can't do it. The health insurance would eat my whole pension. I would love to retire and give my job to a younger man. Can't do it. Now, they want my 401K. If they do something really bad, they will come in and take part of it for "taxes" - confiscation of my money by the government. The deal was I would pay taxes when I was withdrawing it in retirement. I am happy to do that. But now to come along and change the rules, cut the amounts you can save and take taxes now? It is just like Social Security. I have been putting in since I was 15 years old and started working. I will be taking that at 62 before they fuck me out of it. It is at the point where no matter how much you have worked or saved, you can't retire. Your only hope is to die rather quickly. I am beyond sickened by what has happened to this country. Trump and the GOP don't give a shit about anybody but themselves and their rich friends. All those dumb ass coal miners and idiot voters that wanted "change" - well, you got it. A huge boning up America's ass with no lube. How's that for change? See you under the bridge where we will all be living. You bring the tuna fish.

[HAB911]

85. Trumpanzees knew what they were getting into

and will die having it done to them