Quote:
Originally Posted by goofyballer
This is so weird, wouldn't this make 401ks the same as Roth IRAs? And wouldn't it hurt workers now who are presumably making more money now than they plan on withdrawing yearly in retirement?
It's not obvious to me if it's:
A) Remove tax-deductibility of 401k contributions, the end. 401k account withdrawals are taxed as ordinary income.
B) Remove tax-deductibility of 401k contributions, but make withdrawals tax free.
Option A turns 401k into normal, non-sheltered after-tax accounts, with absolutely no incentives to use them vs. a normal account, but with the restrictions that make that money less available than normal after-tax accounts.
Option B turns them into Roth IRAs. Which may be better or worse depending on whether you think your current tax rates are higher than they will be when you withdraw money. (If current rates higher, then current deductions are more valuable and you'd prefer 401k-type treatment.)
Like, this proposal is so stupid and will be so obviously unpopular that I don't actually believe that it will ever show up in any actual bill ever.