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Biden’s Tax Plan and Retirement Prep

Posted on 11/4/20 at 8:50 pm
Posted by DiamondDog
Louisiana
Member since Nov 2019
12061 posts
Posted on 11/4/20 at 8:50 pm
I’m 35. Obviously I am a long way to retirement. 32 years in fact if all breaks my way.

Right now we are maxing one 401k
My wife’s at 6%.

Obviously, I’ve read this piece on Biden’s tax plan.

CNBC

What should I be expecting to do to prepare for this possibility and is there anything we should be worried about?

I honestly feel like 401k changes is the next tax grab as it’s viewed as only be benefiting the wealthy.
Posted by bigbuckdj
Member since Sep 2011
1963 posts
Posted on 11/4/20 at 9:10 pm to
Only you can answer that. the calculation will be similar to a roth vs traditional comparison.

The way I read his plan is that "traditional 401k contributions" will no longer be pre tax. you will receive a 26% tax credit for whatever you contribute.

I think it is a little more complicated than what i am saying but basically if you are in the 30% bracket or higher youd probably want to switch to roth contributions instead of traditional. you will be lightly taxed on the way in and fully taxed on the way out unless you expect to drop tax brackets a lot in retirement.
Posted by castorinho
13623 posts
Member since Nov 2010
84687 posts
Posted on 11/4/20 at 9:19 pm to
A little too early to do anything to prepared for that. Nothing you can do but educate yourself, but until it's actually proposed and implemented not much you can do.
Posted by Paul Allen
Montauk, NY
Member since Nov 2007
77264 posts
Posted on 11/4/20 at 9:56 pm to
Nothing is more important than time in the market. You’ll be just fine regardless of who’s President for the next 30 years.
Posted by MSTiger33
Member since Oct 2007
21050 posts
Posted on 11/5/20 at 2:25 am to
I don’t see the senate signing off on that
Posted by BestBanker
Member since Nov 2011
18317 posts
Posted on 11/5/20 at 7:11 am to
quote:

Nothing is more important than time in the market.

While I agree that length of time saving is valuable to the overall amount for a future distribution period, time in the market is not the most important. It is important, but not most important. Saving is most important. The market carries no guarantees, and being in a position for change is vital to a successful outcome.

The previous statement is my opinion and did not reflect the views of MT Premium Membership. It also doesn't read that the market is not a useful place to grow asset values.
Posted by FinleyStreet
Member since Aug 2011
8000 posts
Posted on 11/5/20 at 7:37 am to
quote:

traditional 401k contributions" will no longer be pre tax. you will receive a 26% tax credit for whatever you contribute.


This plan really sucks. People already don't save enough. How does making the 401k less tax advantageous help with the savings crisis?

If this passes, I will just start dumping more into brokerage accounts.
Posted by BestBanker
Member since Nov 2011
18317 posts
Posted on 11/5/20 at 8:39 am to
quote:


This plan really sucks. People already don't save enough. How does making the 401k less tax advantageous help with the savings crisis

Could make one rely solely on the government for their sustenance?
Posted by BearsFan
Member since Mar 2016
1283 posts
Posted on 11/5/20 at 9:06 am to
Could someone explain the “tax credit” to me? What does that actually mean? Thanks.
Posted by BestBanker
Member since Nov 2011
18317 posts
Posted on 11/5/20 at 9:11 am to
From IRS site:

quote:

Tax credits provide a dollar-for dollar reduction of your income tax liability. This means that a $1,000 tax credit saves you $1,000 in taxes. On the other hand, tax deductions lower your taxable income and they are equal to the percentage of your marginal tax bracket. For instance, if you are in the 10% tax bracket, a $1,000 deduction saves you $100 in tax (0.10 x $1,000 = $100).
Posted by wutangfinancial
Treasure Valley
Member since Sep 2015
11677 posts
Posted on 11/5/20 at 9:15 am to
quote:

This plan really sucks. People already don't save enough. How does making the 401k less tax advantageous help with the savings crisis?


Why save when you can consume on credit?
Posted by cameronml
Member since Oct 2007
1934 posts
Posted on 11/5/20 at 9:32 am to
I wouldn't speculate or make plans until:

1) We know who the President will actually be
2) Legislation is actually passed - which if Biden is elected is unlikely, given Republican control of the Senate
Posted by jimbeam
University of LSU
Member since Oct 2011
75703 posts
Posted on 11/5/20 at 10:27 am to
Stop thinking logically
Posted by TorchtheFlyingTiger
1st coast
Member since Jan 2008
2683 posts
Posted on 11/5/20 at 12:00 pm to
quote:

This plan really sucks. People already don't save enough. How does making the 401k less tax advantageous help with the savings crisis


This would actually incentivize more savings. More tax advantageous unless you're in the 32% tax bracket making over $329k taxable married filing joint.

Just read the article.
This post was edited on 11/5/20 at 1:26 pm
Posted by Weekend Warrior79
Member since Aug 2014
19292 posts
Posted on 11/5/20 at 12:29 pm to
quote:

The way I read his plan is that "traditional 401k contributions" will no longer be pre tax. you will receive a 26% tax credit for whatever you contribute.

As an extreme example, if your effective tax rate is in the low/mid teens; would it then make more sense for some people to begin considering traditional over ROTH since you will get a 26% credit?
Posted by CrawfishOfWallstreet
Member since Oct 2020
253 posts
Posted on 11/5/20 at 12:53 pm to
Everyone should read the article again.

That isn't Biden's tax plan. The only thing Biden has said is "Equalizing the tax benefits of retirement plans. Current tax benefits for retirement savings provide upper-income families with a significant tax break, while providing a limited benefit for low- and middle-income workers. Biden will equalize benefits across the income scale, so working families also receive substantial tax benefits when they put money away for retirement."

What that article does is speculate using third party suggestions of what that looks like, namely using a tax credit instead of a deduction.

I wouldn't recognize any changes in behavior based on musings about a proposal that would still have to get approved by what looks to a split Congress.
Posted by JohnnyKilroy
Cajun Navy Vice Admiral
Member since Oct 2012
38823 posts
Posted on 11/5/20 at 1:03 pm to
quote:

This plan really sucks. People already don't save enough. How does making the 401k less tax advantageous help with the savings crisis?


Are you married and does your household make over 327k?
Posted by Fat Bastard
2024 NFL pick'em champion
Member since Mar 2009
82522 posts
Posted on 11/5/20 at 10:47 pm to
quote:

You’ll be just fine regardless of who’s President for the next 30 years.




pure assumptions. they implement socialist policies taxes will go up, income, cap gains, dividends, you name it. remember how obama lied? all the hidden taxes? retirement accounts could easily be raided by left wing filth way before 30 years.
This post was edited on 11/6/20 at 10:01 am
Posted by Fat Bastard
2024 NFL pick'em champion
Member since Mar 2009
82522 posts
Posted on 11/5/20 at 10:59 pm to
(no message)
This post was edited on 11/5/20 at 11:09 pm
Posted by seawolf06
NH
Member since Oct 2007
8159 posts
Posted on 11/6/20 at 7:04 am to
Don't try to plan anything until we know:
1. Senate results
2. See the final plan

Rarely do presidents ever follow through with campaign promises.
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