$2,400 401k Contribution Limit Considered

[Gilberto de Piento]

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.

https://www.nytimes.com/2017/10/20/us/p ... 401-k.html

[Ego]

Good twitter session from the presidential toilet this morning. No changes to the limits.
https://www.nytimes.com/2017/10/23/us/p ... udget.html

President Trump said early on Monday that his proposed tax plan would not prompt any changes to Americans’ tax-deferred retirement plans, pushing back against reports that the Republicans are weighing a proposal that would significantly reduce the income workers can save in these popular programs.

[IlliniDave]

Haven't dug into that in detail but I thought what I'd heard is that the complete idea was to limit pre-tax contributions to $2,400 but that the balance could still be contributed post-tax (i.e., what's known as Roth 401k). Like the article concluded, it's about short-term revenue and will be disadvantageous to people like me who are in a higher marginal tax bracket now than expected in retirement.

[C40]

Seems like that would be a very short-sighted move. That's such a huge change that I think it's extremely unlikely. And how much difference would it really make, with the average savings rate so damn low anyways.

[jacob]

For a very even-handed explanation of taxation politics w/o red/blue sideswipes (I'm watching you, Ego. In the future, please refer to it as the presidential throne or, better, not at all), I recommend reading https://www.amazon.com/Benefit-Burden-R ... B00D1GARPI for some insight into what kind of tax plans the reds and the blues could potentially come up with. This is important to be aware of, because tax policy can change a lot over the decades. Capital and equity in particular, for example, is currently very favored relative to the historical basis.

The 401k reduction is mentioned in there as a possible target along with the---apparently not so sacred after all---home owner's mortgage deduction. The middle-class consumer Jedies are gonna feel that one for sure

Add/honorable mention: state tax deduction (you can imagine how senators in high tax states would resist that).

[Seppia]

Sounds like a bad idea, but the (albeit still short) history of this administration would suggest that actual implementation of such a complex change is unlikely.

[C40]

@jacob, I'm thinking about buying that book.. But it feels like one of those big "that's who I'm going to be now, a guy who reads entire books about tax code when it doesn't really matter for me directly?" decisions.

[jacob]

@C40 - Well, I'd say ... after reading it, I actually felt smarter for a change. And that's a rather rare feeling for me after reading regular non-fiction books which are mostly a waste of time. To me most non-fictions is a waste of time because they're usually 300+ pages of mundane triteness in return of 0-2 decent ideas/quotes. However, this one is much better.

[C40]

ok I'm sold

[jacob]

http://abcnews.go.com/Politics/house-ta ... d=50861872

Latest draft. In the cross hairs are the 401k deduction and state/local income tax deductions. I doubt the estate tax is relevant to anyone here.

[IlliniDave]

Doesn't sound like this will be a tax cut for me in the sort-term being in the upper half of the middle class in terms of income. But where the rubber meets the road is what they do with the brackets. If I save enough there I won't miss the deductions. It's only a 1-2 year problem for me. What really matters to me is what happens to me when I stop the corporate gig and my income plummets.

Have also heard (NPR) that the "millionaire tax" is staying in place. As best as I could tell that is an informal term used by some to refer to the 39% bracket, apparently to be imposed on people with incomes north of $1M.

[IlliniDave]

http://www.cnn.com/2017/11/02/politics/ ... index.html

Lots more detail out today. No change to 401(k), increase standard deduction at the expense of losing personal exemptions, caps to state/local tax deductions, raise child tax credit cap on mortgage interest deduction lowered, retooled brackets, no AMT (yay-I usually don't pay it but it's a PITA to prove I don't).

Back of the envelope it won't change much for me now, moderately advantageous down the road maybe.

Long way from being done, will be interesting to follow the horsetrading. Moderately high income folks in states that tax aggressively and with high real estate prices (or worse, both) seem to come out worst. Doesn't seem like the sweeping overhaul they are selling it as, but I only look at it from my own shoes.

[jacob]

https://www.cnbc.com/2017/11/02/student ... block.html

Student loan deduction is on the chopping block.

https://arstechnica.com/cars/2017/11/re ... le-credit/

Electric vehicle credit to expire.

[cmonkey]

Here is a comprehensive list.


With a SD of (2 X Jacob) per person, should make ERE a breeze now!

[taemoo]

I wish the SD was up more, minus the exemption it's only a difference of 1600 increase