I don't know much about the proposals but wouldn't capping 401K contributions that low essentially automatically increase taxes by like 3K/yr for the middle and especially upper middle class? I can't see that being too popular overall, especially with all the fiscal conservative, semi religious Dave Ramsey types voting for repubs.

Sure. But that cash would be going into your pocket rather than your 401k account. I.e. You're in the 25% marginal bracket and you usually max out your 401k at $18k per year. Instead, you're now only allowed to contribute $2,400, thus adding $15,600 to your taxable income.

You pay 25% in taxes which is $3,900. But that adds $11,700 into your pocket (ignoring state taxes for this exercise).

This obviously ignores company matching, lifetime earnings on those 401k dollars, and the difference in tax rates during the working years versus the retirement years. But a lot of people forget that 401k contributions are more of a tax deferral strategy rather than a tax savings strategy.

Capping 401k af 2,400 would stroke most middle class families.

It’s my main retirement plan. I put about 10K in last year and on pace for that this year.

Great idea if the goal is to further erode the middle class, crash the stock market, and make a lot more people totally instead of partially reliant on a SS system that may not even exist in the future.

When do they come after the "tax free" growth that was promised in Roth's?

This actually correlates correctly. If by taking healthcare away from people and you shorten their lifespan, then technically there is no need for a 401k.

I suspect the motive here is to eliminate the cost of the company match. These people are evil.

How I'm reading that WSJ story is that the idea is to force all contributions above $2400 to go into a Roth 401k.

Traditional IRA/401k: Tax Free going in ---> Taxed going out at ordinary rates
Roth IRA/401k: Taxed going in at ordinary rates ---> tax free coming out

The reason why the traditional is preferred -- for most people -- is because when you are earning money you are typically in a higher marginal tax bracket while working, and then when you retire you "fill up" your lower tax brackets first with money that was "supposed" to be taxed at your higher working marginal rates.

Example: You make $118000. You contribute max $18000 to traditional 401k. You were "supposed" to have that money taxed at 28% in the single tax bracket. But now, when you retire.... you use that money to live on. You get to "fill up" the 10%, the 15% and the 25% tax bracket with your 401k and social security savings.

In all reality this is an "accounting" trick. The WSJ article stated that there is 7.5 TRILLION in traditional 401k accounts. The government will one day get a huge chunk of that taxed at ordinary income rates. But if that was all in a Roth? Well sorry Felicia. They wouldn't see a dime.

Forcing a transition to Roth would bring in current tax revenue at the expense of future tax revenue. Kind of a robbing Peter to pay Paul.

Still though, you know how I feel about the GOP touching my precious 401k.

The pitchfork is ready.

What do you mean by this?

Pretty sure Sherrod will leave your 401k alone. Voting for him?

https://forumserver.twoplustwo.com/s...ostcount=62556

I've voted for Sherrod in 2006 vs. Dewine and in 2012 vs. Mandel. It's not a hard vote. Appears I'll be doing it again.

Employers don't typically match contributions to Roth IRAs the way they do to a 401k. Less money needing to be matched = more money in the employer's pockets. Unless you're naive enough to think that companies would simply give this money back to their employees in the form of higher salaries.

How that WSJ article reads---- is that it's going to force contributions over $2400 into Roth 401ks. They are currently "rare" in the wild, but some employers offer them. Employers still can match those.

Regardless, I just hope this thing gets excised. Someone --- a staffer, a Congresscritter, a financial services lobbyist --- leaked this in order to get people "up in arms" to stop it.

It wasn't last year either, but here we are.

They're trying to move as much taxable income into the 10 year accounting window to offset the tax breaks for corporations and high earners because of reconciliation

awval, this administration is in the business of screwing over the middle class as much as possible. this was obv to any valedictorian that was paying attention.

this particular idea may get cut, but something will replace it. regardless, the middle class is going to be much worse off in the upcoming years.

It shouldn't have anything to do with reconciliation.

Reconciliation only has limits on adding to the deficit after 10 years (Byrd rule).

They could pass YYYUUUGGGEE tax cuts (like Bush's 2001/2003 cuts) with no way to pay for them and huge deficits and sunset them after 10 years.

It appears they are trying to bring costs down to satisfy the deficit hawks??

I think you're right. They do mention reconciliation but that the bill is the opposite of what you'd want to do under reconciliation. They don't mention any rule about forcing people to use a Roth, in the article they just imply that that's what people would do voluntarily.


https://www.nytimes.com/2017/10/20/u...tax-401-k.html

Most won't, though. The primary idea here may be the accounting trick to offset lost revenue, but it's also an out for companies to reduce their match without looking bad.

The PPP says... capping 401k isn't a bad idea

http://peoplespolicyproject.org/2017...y-a-good-idea/

That link doesn't even attempt to explain how reducing 401k contributions helps lower paid workers.

This isn't a debate about pensions vs. 401Ks. Pensions aren't on the table.

I imagine it's a similar argument as "raise taxes on the wealthy", in that that link is making the case that a 401k is essentially a tax break for the top ~30% of the country.



I expect it to be political suicide, as the sweet spot for the 401k tax break is people making like 100k-200k a year (aka what we call "the middle class") who can afford to put away 10-20k a year for retirement and for whom the resulting tax break is a big deal, as opposed to people making way more than that who could give two ****s about saving $5k from writeoffs

I think people higher on the income scale care a lot about this one. For someone making 200k to 500k in NY or CA, an $18,000 annual deduction is significant.

As a matter of policy, I guess its not that bad to get rid of it. But it sure seems to hammer bread and butter GOP voters. They probably don't care, it's the racism stupid, but Republicans are making it very clear they dgaf about anything at all except lining the pockets of the .01% with this stuff.

It's not even that bad for higher earners (or anyone really). You'll still be able to put in 18500 in a Roth 401k.

Try explaining that to dumb GOP voters. Also bye bye employer matching.

My work matches whichever you contribute to, Roth or regular. No reason why employers wouldn't match employees Roth