Changing the 401k
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wrote on 25 Aug 2020, 22:22 last edited by
Well, now we know what tomorrow's RNC speeches will be all about, LOL.
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wrote on 25 Aug 2020, 22:26 last edited by
They are coming for everything conscientious workers and savers spend their lives personally building. All of it will be framed as privilege.
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wrote on 25 Aug 2020, 22:53 last edited by
The Forbes article's author Elizabeth Bauer took one phrase from Biden's plan, "equalize the network of retirement saving tax breaks”, and wrote the article based on speculation.
Bauer immediately focuses on the $51k contribution cap -- one that in reality applies mostly to business owners/profit-sharing partners rather than the typical workers' contribution cap of $19.5k -- and assumed that Biden will go for reducing the incentives for that higher cap rather than increasing incentives to lift the lower cap.
Perhaps Forbes' readership are mostly business owners/profit-sharing parters who would more naturally care about the higher cap, perhaps that explains Bauer's focus. But that does not justify Bauer's speculation.
In any case, you tell me how many workers even take full advantage of the lower $19.5k cap available to them today. In the mean time, there are some really good ideas in Biden's plan that can benefit lots more rank of file workers (e.g., the "automatic 401(k)") who are less likely to be significant to Forbes' readership, hence Bauer pays it no attention.
From https://joebiden.com/older-americans/# :
IV. EQUALIZE SAVING INCENTIVES FOR MIDDLE-CLASS WORKERS
In the modern retirement landscape, a sound retirement begins with years of diligent saving. While other aspects of the Biden Plan will help raise wages for workers and reduce costs for spending like child care and health insurance, the Biden Plan will also ensure that middle-class families get a leg up as they grow their nest egg.
Under current law, the tax code affords workers over $200 billion each year for various retirement benefits – including saving in 401(k)-type plans or IRAs. While these benefits help workers reach their retirement goals, many are poorly designed to help low- and middle-income savers – about two-thirds of the benefit goes to the wealthiest 20% of families. The Biden Plan will make these savings more equal so that middle class families can enter retirement with enough savings to support a healthy and secure retirement. President Biden will do so by:
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Equalizing the tax benefits of defined contribution plans. The current tax benefits for retirement savings are based on the concept of deferral, whereby savers get to exclude their retirement contributions from tax, see their savings grow tax free, and then pay taxes when they withdraw money from their account. This system provides upper-income families with a much stronger tax break for saving and a limited benefit for middle-class and other workers with lower earnings. The Biden Plan will equalize benefits across the income scale, so that low- and middle-income workers will also get a tax break when they put money away for retirement.
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Removing penalties for caregivers who want to save for retirement. Under current law, people who work as caregivers without receiving wages are ineligible to get tax breaks for retirement saving. The Biden Plan will allow caregivers to make “catch-up” contributions to retirement accounts, even if they’re not earning income in the formal labor market, as has been proposed in bipartisan legislation by Representatives Jackie Walorski and Harley Rouda.
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Giving small businesses a tax break for starting a retirement plan and giving workers the chance to save at work. As proposed by the Obama-Biden Administration, the Biden Plan will call for widespread adoption of workplace savings plans and offer tax credits to small businesses to offset much of the costs. Under Biden’s plan, almost all workers without a pension or 401(k)-type plan will have access to an “automatic 401(k),” which provides the opportunity to easily save for retirement at work – putting millions of middle-class families in the path to a secure retirement.
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The Forbes article's author Elizabeth Bauer took one phrase from Biden's plan, "equalize the network of retirement saving tax breaks”, and wrote the article based on speculation.
Bauer immediately focuses on the $51k contribution cap -- one that in reality applies mostly to business owners/profit-sharing partners rather than the typical workers' contribution cap of $19.5k -- and assumed that Biden will go for reducing the incentives for that higher cap rather than increasing incentives to lift the lower cap.
Perhaps Forbes' readership are mostly business owners/profit-sharing parters who would more naturally care about the higher cap, perhaps that explains Bauer's focus. But that does not justify Bauer's speculation.
In any case, you tell me how many workers even take full advantage of the lower $19.5k cap available to them today. In the mean time, there are some really good ideas in Biden's plan that can benefit lots more rank of file workers (e.g., the "automatic 401(k)") who are less likely to be significant to Forbes' readership, hence Bauer pays it no attention.
From https://joebiden.com/older-americans/# :
IV. EQUALIZE SAVING INCENTIVES FOR MIDDLE-CLASS WORKERS
In the modern retirement landscape, a sound retirement begins with years of diligent saving. While other aspects of the Biden Plan will help raise wages for workers and reduce costs for spending like child care and health insurance, the Biden Plan will also ensure that middle-class families get a leg up as they grow their nest egg.
Under current law, the tax code affords workers over $200 billion each year for various retirement benefits – including saving in 401(k)-type plans or IRAs. While these benefits help workers reach their retirement goals, many are poorly designed to help low- and middle-income savers – about two-thirds of the benefit goes to the wealthiest 20% of families. The Biden Plan will make these savings more equal so that middle class families can enter retirement with enough savings to support a healthy and secure retirement. President Biden will do so by:
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Equalizing the tax benefits of defined contribution plans. The current tax benefits for retirement savings are based on the concept of deferral, whereby savers get to exclude their retirement contributions from tax, see their savings grow tax free, and then pay taxes when they withdraw money from their account. This system provides upper-income families with a much stronger tax break for saving and a limited benefit for middle-class and other workers with lower earnings. The Biden Plan will equalize benefits across the income scale, so that low- and middle-income workers will also get a tax break when they put money away for retirement.
-
Removing penalties for caregivers who want to save for retirement. Under current law, people who work as caregivers without receiving wages are ineligible to get tax breaks for retirement saving. The Biden Plan will allow caregivers to make “catch-up” contributions to retirement accounts, even if they’re not earning income in the formal labor market, as has been proposed in bipartisan legislation by Representatives Jackie Walorski and Harley Rouda.
-
Giving small businesses a tax break for starting a retirement plan and giving workers the chance to save at work. As proposed by the Obama-Biden Administration, the Biden Plan will call for widespread adoption of workplace savings plans and offer tax credits to small businesses to offset much of the costs. Under Biden’s plan, almost all workers without a pension or 401(k)-type plan will have access to an “automatic 401(k),” which provides the opportunity to easily save for retirement at work – putting millions of middle-class families in the path to a secure retirement.
wrote on 25 Aug 2020, 22:55 last edited by@Axtremus said in Changing the 401k:
the Biden Plan will also ensure that middle-class families get a leg up as they grow their nest egg.
Which the government will take away as soon as they finally get out of the middle class.
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wrote on 25 Aug 2020, 22:58 last edited by
My guys had a higher cap than that, particularly with catch-up provisions.
You would be shocked at how many guys I had that put in $36k.
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wrote on 25 Aug 2020, 23:03 last edited by
Electoral suicide when you are trying to sell to the independents, most of which have 401Ks. Good. Bring it. Riots, stealing your retirement savings, defunding police, BLM. Say hello to four more years.
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My guys had a higher cap than that, particularly with catch-up provisions.
You would be shocked at how many guys I had that put in $36k.
wrote on 25 Aug 2020, 23:13 last edited by@Jolly said in Changing the 401k:
My guys had a higher cap than that, particularly with catch-up provisions.
You would be shocked at how many guys I had that put in $36k.
OK, so a financial adviser has clients that on the whole contribute more into their retirement accounts than the general population. Are you saying that I should be “shocked” by that phenomenon?
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@Jolly said in Changing the 401k:
My guys had a higher cap than that, particularly with catch-up provisions.
You would be shocked at how many guys I had that put in $36k.
OK, so a financial adviser has clients that on the whole contribute more into their retirement accounts than the general population. Are you saying that I should be “shocked” by that phenomenon?
wrote on 25 Aug 2020, 23:17 last edited by Jolly@Axtremus said in Changing the 401k:
@Jolly said in Changing the 401k:
My guys had a higher cap than that, particularly with catch-up provisions.
You would be shocked at how many guys I had that put in $36k.
OK, so a financial adviser has clients that on the whole contribute more into their retirement accounts than the general population. Are you saying that I should be “shocked” by that phenomenon?
Yes, I think you should, since my clients were primarily municipal, parish and state employees. The average salary today of a state worker is $38,702. I've had guys dump almost their entire checks into investment funds during catch-up provisions.
Situations vary.
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@Axtremus said in Changing the 401k:
@Jolly said in Changing the 401k:
My guys had a higher cap than that, particularly with catch-up provisions.
You would be shocked at how many guys I had that put in $36k.
OK, so a financial adviser has clients that on the whole contribute more into their retirement accounts than the general population. Are you saying that I should be “shocked” by that phenomenon?
Yes, I think you should, since my clients were primarily municipal, parish and state employees. The average salary today of a state worker is $38,702. I've had guys dump almost their entire checks into investment funds during catch-up provisions.
Situations vary.
wrote on 25 Aug 2020, 23:32 last edited by@Jolly said in Changing the 401k:
@Axtremus said in Changing the 401k:
@Jolly said in Changing the 401k:
My guys had a higher cap than that, particularly with catch-up provisions.
You would be shocked at how many guys I had that put in $36k.
OK, so a financial adviser has clients that on the whole contribute more into their retirement accounts than the general population. Are you saying that I should be “shocked” by that phenomenon?
Yes, I think you should, since my clients were primarily municipal, parish and state employees. The average salary today of a state worker is $38,702. I've had guys dump almost their entire checks into investment funds during catch-up provisions.
Situations vary.
Ah, you’re dropping selective statistics trying to impress me. Sure, the average salary of a state worker is $38.7k, but what is the average household income of your clients who each put $36k into retirement account per year? Notice I ask about “household income.” Why? Because if you have a high income spouse or you’re already loaded with income from other sources, you can afford to put (almost) entire paychecks into retirement accounts.
Your have clients who can afford to stick $36k a year into retirement accounts. Good for you, good for your clients. Forbes and Bauer have readership who are in situations that predispose them to care more about the $51k cap than the $19k cap. Good for them. If you want to try to argue that somehow the $51k cap is what most tax payers care about, good luck with that.
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wrote on 26 Aug 2020, 00:44 last edited by
So why fool with the cap? What do you have to gain vs. what you have to !ose?
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wrote on 26 Aug 2020, 02:19 last edited by
What’s dumb about these proposed tax policies is it pretends wealth growth is a zero sum game. Just because Person A earns $50,000 doesn’t mean Person B else loses $50,000.
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wrote on 26 Aug 2020, 03:05 last edited by
It’s the new third rail, like Social Security. Huge, huge unforced error.
