- Mike Blake/Reuters
- The GOP wants to punish people saving for retirement to finance Trump’s tax cuts. A new plan would encourage people to save less and likely tax them at a higher rate if they want to save more.
The GOP has come up with a new idea for paying for the massive tax cuts Trump has promised – steal from American’s retirement savings.
It’s an innovative way to steal from the future that is even less complicated than the old way.
The GOP wants to cap the amount of money you can put into a traditional, tax-deferred 401(k) account, or IRA, at $2,4000. After that you’ll be forced to put your money in a Roth account, which taxes the money as it’s added to the account.
In other words, the Trump administration is incentivizing Americans to save less and give the government more so that it can finance tax cuts that largely benefit the wealthiest Americans.
More on the details from BI’s Bob Bryan:
For 2017, the annual cap on traditional 401(k)s is $18,000 for people under 50 and $24,000 over 50. For an IRA, the caps are $5,500 and $6,500 for the respective age groups.
The new cap would not apply to existing savings already in accounts and employer contributions to a traditional 401(k) or IRA would not be subject to a cap, according to the Journal.
A few things to think about here:
- The GOP is acting as if saving for retirement is not a serious issue in this country. When you’re younger and working, you’re likely going to be in a higher tax bracket than you are when you’re pulling your money out for retirement and living, in part, on Social Security. That means these funds going into a Roth are going to be taxed at a higher rate than they would be if you put them in a traditional IRA.
This is a terrible idea.