Posted on 10/12/2011 4:26:54 PM PDT by Kaslin
s your 401(k) safe from the tax man? That's a question that might be worth asking, as the congressional "supercommittee" scrambles to find $1.5 trillion in additional deficit cuts.
In September, the Senate Finance Committee held a little-noticed hearing that explored changes to retirement plans — principally employer-sponsored 401(k)s — that would in one way or another cut their tax deductions.
The tax breaks' size makes them a tempting target for lawmakers. According to the White House budget office, tax exemptions for 401(k)s and IRAs will "cost" the government more than $436 billion over the next five years.
Senate Finance Committee Chairman Max Baucus, D-Mont., complained that "in spite of the tremendous tax preferences," Americans aren't saving nearly enough for retirement.
Critics say the existing system benefits mostly the rich. The liberal-leaning Tax Policy Center calculates that 80% of these tax "expenditures" go to the top 20% of earners. Such people "would almost certainly save for retirement even without tax incentives," said Karen Friedman, policy director at the Pension Rights Center.
But Judy Miller of the American Society of Pension Professionals and Actuaries argues that the deduction's cost is wildly exaggerated. Adjust for the taxes paid when retirees withdraw money and the cost is cut in half.
And, she says, the break is more progressive than some allege. Among other things, high earners who get a bigger tax break going in end up paying more in taxes when they take the money out.
(Excerpt) Read more at investors.com ...
One huge problem with that approach is that many companies have abandoned defined benefit pension plans in favor of 401(K) plans, with limited company participation—matching up to 6%, for instance. If that happens, many more people will end up without any retirement except for the failed Social Security System.
The Wells Fargo/Wachovia merger, and the Bank of America/Merrill Lynch merger both were announced before the election in 2008.
The point is not the cost to government,. That’s just the excuse. What this is really about is the fact that this is a huge pool of money that the government wants to get its hands on. It’s for the children, you know.
Any of your money that you don't give to the government, the government considers as a "cost" to the government.
America WAS a place where you strived to better your life, for your FAMILY, for your own self-respect, and the FREEDOM to choose your path.
For Liberals, whatever someone else has EARNED, they want it GIVEN to them.
Taxing success is their idea of Utopia.
This is just nonsense. Ask anyone who has an IRA what happens when you make a withdrawal. The answer: The withdrawal adds to your taxable income and is taxed at your maximum tax rate. The Government is doing better than just fine with the system they have.
To be fair, all defined contribution systems
would have to assess a current worth,
disperse that worth, and close all operations,
for the dispersed worth to be taxed exactly the same way.
This should include all municipal systems,
federal systems, and labor unions.
Additionally, to be fair,
all social security benefits
would be assessed, taxed, and dispersed,
and Social Security Closed as a system,
returning, post taxation, all worth to the individual.
I can just hear the Primal Screams
Maybe before the election, but during the bail-out period.
Bush was a zombie during that period and just let the Democrats run everything.
What they are considering is lowering the maximum allowed contribution. It's currently $16,500/year, with an additional $5,500 if you are over 50. You simply won't be able to contribute as much in the future.
The claim is that it primarily benefits the "rich". The problem is: that's peanuts to the "rich". What's really happening is that the upper middle class (like me) is socking away as much as possible in preparation for retirement, with the expectation that Social Security is going to be "means-tested" out of existence for me.
That's correct, but these guys are all about pushing costs into the future. If all they are looking to do it make it through the 2012 election, what good is taxing the gains on someone's tax-deferred retirement plan 20 years from now?
Not if they want to claim to be in faovr of the middle class.
You know those tens of thousands 401(k)’s are driving Schumer, Reid, Durbin and all the rest of the democrats crazy. They probably sit around a table every day trying to figure out how to get hold of the millions of dollars in those IRA’s. Or, at least a way to tax them. They probably have nightmare’s thinking about all that money sitting there with DEFERRED TAXES, that can’t be taxed until the IRA’s are cashed in.
“So long term, it doesn’t “cost” the government any tax revenue, because the taxes are paid on the back end, not year by year.”
If you die with 401K money, your beneficiaries avoid tax on gains altogether.
Good for him. I would also eliminate the mortgage deduction. All deductions gone and all taxes lowered across the board. (note: I take the max 401 every year along with a large mortgage deduction which I would lose).
Tax hit plus 10% penalty if you are not yet 59 1/2 years old yet.
You’re assuming they’ll let you do that. Never underestimate the greed of Government.
I consider most of the money I pay in taxes “WASTED”.
If you die, the heirs pay tax on what they get unless they roll it over into a survivor Ira. I think they pay income tax on what they don’t roll over. Not cap gains.
Actually you probably have a lower income tax rate when you take it out. Put in in and don’t pay taxes until you retire and most people are in a lower bracket plus you don’t pay FICA on it ever.
Actually you probably have a lower income tax rate when you take it out. Put in in and don’t pay taxes until you retire and most people are in a lower bracket plus you don’t pay FICA on it ever.
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