Interesting article. I didn't even know the 401(k) was under attack, but with the money involved, that might become a thing. Your 401(k) Will Be Gone Within a Decade If you are among the 56% of US workers with a retirement plan, I have some bad news for you: Your 401(k) will be gone in 10 years, tops. Not the money, thank goodness — Americans have trillions of dollars in these accounts, and there is an entire industry built around them — but the plans themselves. There has been a brewing intellectual movement to get rid of the 401(k) for several years, with scholars on both the right and left questioning its value. And as the federal government gets increasingly desperate for new sources of revenue, the tax treatment of 401(k)s is a likely target. There are good policy reasons to end it, but the question remains: Will Americans still save for retirement? If there are scholars on "both the right and the left" questioning it than if this ever becomes a thing, I predict one side will become pro and the other side will become anti. No such thing as real bipartisanship after all.
I predict most likely they will lower the amount of money that can go into a 401(k). So it will end up giving less tax benefit to the more well off middle class. The government is coming under a lot of pressure to eliminate all sorts of different categories of tax deductions. (It's politically an easier thing to do than increase tax rates)
Gosh, if you Americans just increased your tax a little bit, improved education a little bit, put up tariffs a little bit and limited your illegal immigration a little bit, there could be a real sea change.
Doing away with the 401k is really stupid. Most all company pensions are gone. No one can live on social security payments. Personal savings are way down. Do the government fools who want to do away with the 401k want a flood a destitute seniors for them care of? Do they think that the extra taxes they collect will be more than the costs of taking care of millions of seniors? This idea is stupid!
There's a strong tendency in government to ignore the more distant future in favor of the now. (How else to explain why they keep racking up so much debt?) Unfortunately, this proposal could just be another manifestation of that. Leave the problem for another round of politicians to deal with, for another slightly younger generation to deal with. Most of these politicians (and many of the voters) will be retired or dead by then. And of course you know any change is going to have a "grandfather clause" (or effect), so older people who already have big savings in their 401k will not be affected too much when it is taken away. Another subtle example of this is the elimination of the "spousal benefit" in Social Security. Something that a future generation will never realize ever even existed. A Social Security spousal rule that has been around for decades officially ends this year for everyone except those who turned 70 on January 1, 2024. The rule allows recipients to switch between their benefits and their spouse's to receive the maximum amount. Under the expired rule, the higher-earning spouse would claim spousal benefits at full retirement age while the other spouse claims their own benefit. The higher earner would then switch to their benefits at age 70, which maximizes the monthly Social Security payment because of the delayed retirement credits. In addition, the lower-earning spouse would be able to claim a spousal benefit or keep their own, depending on which is higher. This Social Security Spousal Rule Is Officially Finished in 2024 -- But These 3 Strategies Remain, by Vance Cariaga, Yahoo Finance, Feb 21, 2024
The factor you left out is controlling spending. That is the key. Raising taxes only makes the stupid politicians from both parties want to spend more. Nothing ever gets fixed until spending is controlled. The only reason that Obama and Clinton made things look good for a while during their terms was because there was sequestered spending limits in effect.
I'm under the impression that recently 401Ks have generally been considered a failure and soon they will go away. The government will have to think carefully about what they replace it with. Ha! They won't replace it with anything. They will leave the elderly to work things out on their own. Besides, I've heard that today's Americans will be working until they die anyway. What I never understood was why defer taxes on retirement savings in the first place? Why not tax the earnings up front, while a person is still young and has a job, instead of waiting to tax them when the person is old and on a fixed income? Most all, but the last $50 dollars can be taken from them if they need the support of a nursing home or other care facility.
They been saying that for like 100 years. ...100 years ago- The Revenue Act of 1913 imposed a one percent tax on incomes above $3,000, with a top tax rate of six percent on those earning more than $500,000 per year12. The first $20,000 of income was exempt from taxation, and the rate was 1%34. The marginal tax rate was 1% on income of $0 to $20,000, 2% on income of $20,000 to $50,000, 3% on income of $50,000 to $75,000, 4% on income of $75,000 to $100,000, 5% on income of $100,000 to $250,000, 6% on income of $250,000 to $500,000, and 7% on income of $500,000 and up4. For reference, $3000 in 1913 had the same purchasing power as ~$94,000 today.
An economy that depends on the financial sector for creating wealth is doomed to fail. Out-sourcing the high productivity industries in favor of pretending we're all going to get rich selling each other Apple stock back and forth is just dumb. Too many people trying to mooch off of cheap Asian labor via gambling on imaginary equities can't last.
The "scholars" have been predicting this for decades. Average contribution is less than half of what people could put in, so I doubt that will be necessary. Net worth of Americans has increased by 37% in past few years, so maybe we are not as bad off as we are told. As for taxes, - after all the rounds of tax cuts we are at a point where half the people dont pay income taxes at all.
Misleading, since you are not taking into account inflation. One dollar in 2024 will only buy what 0.80 would buy in 2018. And then a lot of that "net worth" is just due to inflating home prices. But there are some indicators that Americans (collectively) are saving more money in retirement accounts. This despite the fact that nearly half of American households have no money in their retirement accounts. "In 2022, almost half of American households had no savings in retirement accounts, according to the Survey of Consumer Finances (SCF)." Nearly half of American households have no retirement savings (usafacts.org)
Its inflation adjusted . There was a thread about it. Sure. Lot of older people do not, because they have pensions. Fortunately majority of working age people do have 401Ks. 401Ks were advertised heavily in the late 80s and 90s, as "personally responsible" plans which will deliver $5-$10 Million by retirement age if you just put 10% into it from each paycheck starting early in your career. It was all BS of course. They are still a good way to save a good amount in 30 yrs, but even if you max out for 30 yrs, you're still very unlikely to have saved $5 million, let alone $10M. It made the financial institutions billions of dollars, which is why it was created in the first place 0.1% of 401K savers have $5M 3.2% have a million or more
Gen X is the 401(k) 'experiment generation.' Here's how that's playing out. The first generation to rely on 401(k) plans is behind in saving, new research shows. https://finance.yahoo.com/news/gen-...on-heres-how-thats-playing-out-100010909.html Today, just 11% of private employers offer pensions, compared with 35% in the early '90s. More than half of private-sector employees have a 401(k) plan, according to the Bureau of Labor Statistics. What’s behind Gen Xers' sluggish savings rate? Credit card debt and existing loans, particularly student loans, plus financially supporting family members, the survey found. And a big concern is that they may retire earlier than expected. People often retire for reasons beyond their control, such as health needs, caregiving, and job loss, Ceder said.
