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Started By
Message
What If We Ended 401(k) Tax Breaks to Save Social Security?
Posted on 2/6/24 at 1:05 pm
Posted on 2/6/24 at 1:05 pm
That is the title of an article I saw today from "Think Advisor". I thought this board might find it interesting.
What You Need to Know:
The bulk of retirement account tax breaks benefit the affluent, Andrew Biggs and Alicia Munnell argued in a recent paper.
Research shows that tax-preferred retirement accounts don't boost overall household savings, they write.
Another group of researchers argues the plan would amount to double taxation and would ultimately make the Social Security program less stable.
End Tax Breaks for 401K to save Social Security?
What You Need to Know:
The bulk of retirement account tax breaks benefit the affluent, Andrew Biggs and Alicia Munnell argued in a recent paper.
Research shows that tax-preferred retirement accounts don't boost overall household savings, they write.
Another group of researchers argues the plan would amount to double taxation and would ultimately make the Social Security program less stable.
End Tax Breaks for 401K to save Social Security?
20
Posted on 2/6/24 at 1:08 pm to La Place Mike
quote:
The bulk of retirement account tax breaks benefit the affluent, Andrew Biggs and Alicia Munnell argued in a recent paper.
What's stopping the non affluent from taking advantage of these tax breaks?
Posted on 2/6/24 at 1:18 pm to LNCHBOX
Serious? It's just a WAG but they probably would if they could afford to and did not have to spend 100% of their income on day to day expenses etc. 401 contributions are by definition excess income above and beyond what an individual or family needs.
Posted on 2/6/24 at 1:25 pm to windriverwonders
quote:
Serious?
Very much so.
quote:
It's just a WAG but they probably would if they could afford to and did not have to spend 100% of their income on day to day expenses etc
No one "has" to spend 100% of their income on living expenses. That's a choice. And if you have such little income that you must rely on government assistance just to make it, then you are getting to take advantage of something I don't. Why aren't we complaining about that injustice as well?
Posted on 2/6/24 at 1:37 pm to La Place Mike
I’m such a sucker for funding my 401K
there is basically a zero percent chance politicians don’t raid it to fund more entitlement programs at some point in the next 20 years
there is basically a zero percent chance politicians don’t raid it to fund more entitlement programs at some point in the next 20 years
This post was edited on 2/6/24 at 1:37 pm
Posted on 2/6/24 at 1:47 pm to La Place Mike
I'm opposed to any penalty I have to pay in order to compensate for the government's mismanagement of their mandatory retirement fund.
If they would keep their greedy hands out of SS for reasons other than what it was designed for, the fund would be more sustainable and retirement ages lower. They made the mess, and their retirement funds should be sacked before anyone touches the public's private retirement fund.
If they would keep their greedy hands out of SS for reasons other than what it was designed for, the fund would be more sustainable and retirement ages lower. They made the mess, and their retirement funds should be sacked before anyone touches the public's private retirement fund.
Posted on 2/6/24 at 1:58 pm to La Place Mike
I feel like this article misses a few major points:
-The assumptions start off as extremely flawed as they make the assumption that 100% of the increase in income taxes would go straight to SS
-Under their scenarios, would the employer match now become taxable income in the year the employer puts the money into the 401(k)?
-What would be the impact on SS if Congress stopped using the earnings as a nest egg to balance other budgets?
-Before raiding 401(k) benefits to fund SS, can we start by cutting back on sending money all over the world to fund all of these congressional money laundering schemes, I mean aid packages for other countries.
-The assumptions start off as extremely flawed as they make the assumption that 100% of the increase in income taxes would go straight to SS
-Under their scenarios, would the employer match now become taxable income in the year the employer puts the money into the 401(k)?
-What would be the impact on SS if Congress stopped using the earnings as a nest egg to balance other budgets?
-Before raiding 401(k) benefits to fund SS, can we start by cutting back on sending money all over the world to fund all of these congressional money laundering schemes, I mean aid packages for other countries.
Posted on 2/6/24 at 1:59 pm to LNCHBOX
quote:
What's stopping the non affluent from taking advantage of these tax breaks?
Shouldn't be that difficult to run the math on that
Of course it depends on how you define affluence
Posted on 2/6/24 at 2:02 pm to Powerman
quote:
Shouldn't be that difficult to run the math on that
Run the math on what? Are you saying you can only save for retirement in a tax advantaged account if you make a certain amount of money?
Posted on 2/6/24 at 2:10 pm to msutiger
quote:
there is basically a zero percent chance politicians don’t raid it to fund more entitlement programs at some point in the next 20 years
Why would they raid your 401(k)? You pay higher tax rates on withdrawal than practically any other investment option.
If anything they would raid ROTH accounts or raise capital gains taxes.
Posted on 2/6/24 at 3:31 pm to La Place Mike
It’s interesting that many rational people would consider doing the opposite. Imagine if we ALL had 15% of our income sitting in an account that we can check the balance of and actually plan retirement.
IRAs have pretty low contribution limits. 401ks and SEPs can be pretty attractive for high income very small businesses owners but with 401ks the limit is relatively low and other employees need to not be discriminated against. And if you take this away, you take the deduction away. Sure SS tax is deductible but is already higher than most of the matches that are available. The truly affluent will just keep their money.
Ok, so if they don’t boost savings, then the contributions must be insignificant, right?
quote:
The bulk of retirement account tax breaks benefit the affluent, Andrew Biggs and Alicia Munnell argued in a recent paper.
IRAs have pretty low contribution limits. 401ks and SEPs can be pretty attractive for high income very small businesses owners but with 401ks the limit is relatively low and other employees need to not be discriminated against. And if you take this away, you take the deduction away. Sure SS tax is deductible but is already higher than most of the matches that are available. The truly affluent will just keep their money.
quote:
Research shows that tax-preferred retirement accounts don't boost overall household savings, they write.
Ok, so if they don’t boost savings, then the contributions must be insignificant, right?
Posted on 2/6/24 at 5:19 pm to LNCHBOX
quote:
What's stopping the non affluent from taking advantage of these tax breaks?
To be fair, pre tax 401ks are more and more attractive the higher your income is.
However, the solution is asinine. You still pay SS taxes on your 401k contributions.
Posted on 2/6/24 at 7:09 pm to La Place Mike
quote:
Research shows that tax-preferred retirement accounts don't boost overall household savings, they write.
Average idiot does not save or plan for an emergency fund... Let alone retirement.
Nothing will fix this, that's just people
Posted on 2/6/24 at 7:57 pm to UltimaParadox
You don’t give an inch to politicians of either party. How many fixes did it take to break SS?
This would simply be another fix that the next round of politicians take advantage of so anchor babies get free college or whatever pity party they can dream up.
This would simply be another fix that the next round of politicians take advantage of so anchor babies get free college or whatever pity party they can dream up.
Posted on 2/6/24 at 8:35 pm to msutiger
quote:
there is basically a zero percent chance politicians don’t raid it to fund more entitlement programs at some point in the next 20 years
Yep. That's always been my argument against roths. Yes, it's supposed to grow tax free, but I could see the dems changing the laws before I retire and hitting me with a double tax on those funds.
Posted on 2/6/24 at 9:14 pm to jfw3535
quote:
Yes, it's supposed to grow tax free, but I could see the dems changing the laws before I retire and hitting me with a double tax on those funds.
I think they can make it go away, but I can't see how they can't grandfather what's already in there.
The tax deferred is the unknown variable for me. Yes, you avoid (with certainty) taxation now, but they can certainly amp up your rates down the line and tax your grown (and inflated) future dollar with grown (and inflated) future taxes.
But once it is in ROTH, I just don't see how they can un-ROTH it. They would have to make you whole on the taxes you already paid on it, at the very least.
(ETA: I just figured out how we can get to a consumption tax - everybody just go all ROTH right now. That would be their trick - "Okay, no more income tax - national consumption tax!"
)This post was edited on 2/6/24 at 9:16 pm
Posted on 2/6/24 at 9:17 pm to slackster
quote:
To be fair, pre tax 401ks are more and more attractive the higher your income is.
Are they? With the current maxes it really doesn’t move the needle much at all if you have any normal deductions. I quit contributing to a pretax 401k years ago and put everything in a work sponsored Roth under the theory that taxes are going to be much higher in 10 years when I can finally touch the money.
Posted on 2/6/24 at 10:08 pm to SquatchDawg
quote:
Are they? With the current maxes it really doesn’t move the needle much at all if you have any normal deductions.
It depends on your situation, I own a business and using a 401k Will save me a significant chunk….albeit I’ll have to put a significant chunk in to realize that.
This post was edited on 2/7/24 at 7:33 am
Posted on 2/6/24 at 10:49 pm to msutiger
quote:
basically a zero percent chance politicians don’t raid it
Have any proof or historical evidence to back this claim?
Posted on 2/6/24 at 10:50 pm to La Place Mike
quote:
Research shows that tax-preferred retirement accounts don't boost overall household savings, they write.
I don’t understand this sentence.
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