How the GOP Tax Bill Could Squeeze Your 401(k) (55, relative, support)
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The replacement of 401k for IRA accounts won't happen because money managers charge higher fees on 401ks than on IRAs. Given the competition within the marketplace, this would not go well with Wall Street firms and their lobbyists.
Not true in all cases, not true at all. Depends on the employer and who they sign up with and under what terms. Larger employers do have an advantage.
The big problem with the GOP tax cuts plan is that they would like to do something like the Reagan era tax reform but there's not enough areas to reduce/eliminate tax breaks from such as the SALT deduction that would make the tax cuts and reforms revenue neutral. If it was that easy Bush 45 would have done it during his presidency instead of the tax cuts he did.
So right now, there's a push and pull between the White House and Congress on how to get this done. The biggest problem in all of this is that much of the White House staff (Advisors, Cabinet Members, etc.) are seen as outsiders and not willing to play the games of Washington and don't have a real idea of how to make their agenda a reality. Which is why nothing of substance has gotten accomplished so far in this presidency.
Last edited by Peasy973; 10-23-2017 at 09:31 AM..
Reason: -
Not true in all cases, not true at all. Depends on the employer and who they sign up with and under what terms. Larger employers do have an advantage.
Most employers in the US are small businesses. What kind of leverage would small businesses have in receiving lower expense fees from money managers? Heck, most employees can't even contribute to a 401k because their employer are small businesses and can't afford the expense fees as they are now. Larger employers have an advantage over small businesses in many regards but how does this help the other type of businesses and their employees?
Last edited by Peasy973; 10-23-2017 at 09:29 AM..
Reason: better ending
Most employers in the US are small businesses. What kind of leverage would small businesses have in receiving lower expense fees from money managers? Heck, most employees can't even contribute to a 401k because their employer are small businesses and can't afford the expense fees as they are now. Larger employers have an advantage over small businesses in many regards but how does this help the other type of employees?
I said not true in all cases. True in some most certainly and yes small business is a problem area with 401K's and that was why I clearly distinguished large companies. True for you not for us I understand that.
Most employers in the US are small businesses. What kind of leverage would small businesses have in receiving lower expense fees from money managers? Heck, most employees can't even contribute to a 401k because their employer are small businesses and can't afford the expense fees as they are now. Larger employers have an advantage over small businesses in many regards but how does this help the other type of employees?
Which is precisely why IRA limits need to be expanded to match 401K. Maybe that won't happen because lobbyists will block it but it should happen because it's in the best interests of most people.
In taxable accounts you can save as much as you want for as long as you want at any age.
Without the tax incentive, people would save less in the "automatic" fashion that a 401k or similar is. If people are not saving as much automatically, they will spend it and it will not be saved at all.
Sounds like a way to increase taxes on the middle class, without it being designated as a "tax increase." Clever. And lots of middle class won't recognize that, probably.
If this passes, that's harmful to many middle class people. It won't affect me, but after a certain age, I didn't have much saved, so I worked lots of overtime, lived on a much lower income than I was making, so that I could contribute as much as possible to my 401k, and later to a Roth. I read some investment books, too. This was critical to my saving enough to be able to retire (a single female, who had been underpaid most of my life, having been born in the 1950s). My SS was going to be less than an equivalent male's, because of the history in this country of underpaying women. So saving pre-tax was one way to try to provide for my senior years. I was willing to not buy things or go on vacations, so that I could save. And they want to take that option away from the middle class? Esp so that the deficit isn't shown to be as harmful because of the huge tax cuts about to be given to the wealthy?
That is outrageous and shameful. The constituents of these politicians should rise up and let their reps know that this is not gonna happen, if they want to be re-elected. First, they do their best to do away with unions (which provide senior benefits), then they do their best to do away with pensions...and now they're going after the remaining retirement savings vehicles for the middle class. Shameful.
It's things like this that make me nervous about my Roth IRA. Think of all that tax free money sitting in Roths everywhere...I know the politicians would love to get their hands on it. One day they are going to either get rid of the Roth completely or scheme up a way to try and tax withdrawals.
Read my early post. The White House/Repubs have ran out of ideas and can't do actual tax reform for all the tax cuts they want to do. That's why they're trying to pull this stunt. If this is how they want to do the tax reform nobody going to sign on for this. First, it was property taxes and then they heard a huge uproar so now it's this. This is going to be worse than when Bush 45 wanted to privatize social security and didn't explain it correctly.
It's things like this that make me nervous about my Roth IRA. Think of all that tax free money sitting in Roths everywhere...I know the politicians would love to get their hands on it. One day they are going to either get rid of the Roth completely or scheme up a way to try and tax withdrawals.
You've already paid taxes on your Roth IRA. If they wanted to double tax it, that would be shameful and horrendous. Right now, Washington repubs want to tax all of the untaxed 401k and IRA money because it would be a huge windfall and provide the source of tax revenue needed to complete the tax cuts since they can't go after state and local property tax deductions.
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