I thought someone had a link to a paper that said the easiest way to fix Social Security and the general budget deficit was to eliminate traditional 401(k) and IRA plans.
If not, and if no one beats me to it, I’ll dig it out.
I kind of doubt it’ll happen since those vehicle are more beneficial to the rich, but as long as they take the income cap off of Roth IRAs I’ll live, just can’t take as much tax advantage as present.
Looking this guy up, he strikes me like a Dave Ramsey type of talking head. Do you know him, does he seem more useful than Ramsey? I describe Ramsey as “useful for people who know they will eat the first marshmallow every time, generally otherwise has bad advice”.
Clark Howard was a local Atlanta consumer guy before he went national. I’d say he gives pretty good advice in general. Dave Ramsey is more hit or miss to me.
What a prediction
At most I think they will just adjust the Employee/Employer contribution max or stop indexing the cap to inflation
I feel like financial self help guys are more for those who need help getting their expenses under control
This is what I took from the article.
The opportunity to fund 401k’s will be withdrawn by the government because the government knows that they lose tax revenue now. It’s ultimately a better deal for the IRS to tax you now and let you slide on capital gains taxes than to defer income taxes on that savings.
It’s evidence that 401k’s offer a better deal to the consumer than Roth accounts.
This is (I think) what I was thinking of.
This was also discussed in a paper from 2013, and I feel like I saw something else on this from at least a decade prior to that but I can’t immediately find that - and I’m not staying up to look because … [annoyed thought].
Or, they can make SS need-based.
You have enough saved up? No SS for you.
I’m not sure this conclusion to the consumer is part of the discussion. The IRS wants their money now, not later.
Yeah, and I don’t see how this solves anything. More can down road kicking.
I would say this is a stupid change the IRS would never agree to, but the government passed HATFA when almost no one was seeking pension funding relief in the hopes plan sponsors would under contribute to their pensions for a few years so there would be greater taxable income, in order to fund highways.
Kicking the can down the road indeed, and subtly influencing people’s retirement decisions without them realizing it.
In what way does the IRS get to never agree to it? If congress changes a tax provision, the IRS doesn’t get to decide whether or not to enact it.
Sorry, I meant government and not IRS, I just had IRS on my brain. I meant more on a government level, in a “this seems like a stupid idea that would backfire in a much bigger way” kind of way. But making foolish choices that benefit in the short-term without consideration for the long-term is the way of politics, so…reasoning won’t prevail.
I HATE THIS
{I don’t disagree with you that it is on the table}
And I think any needs testing should be based on lifetime earnings, not net worth at age 67.
You made a lot of money but spent it all? No SS for you.
You made a modest living but have something in savings? You get SS.
I didn’t expect it to be popular. Just a potential solution.
You Californians and turning my government-savings account into a tax!
What if you run into a disaster in the family late in the income-earning portion of your life?
When my father had to go into full time nursing care during pandemic lockdowns, I was both glad that he had a nest egg for me to pay the bills from (and had bought into a retirement community with a program that functioned as partial/quasi-LTC), and sweating the numbers over the prospect that if he lived as long as the people on his mother’s side of the family…I could be looking at 20-30 years of those bills, and his nest egg was only enough to get him out 10 years.
We’re fortunate. I’m dreading the pressures we’re going to face if/when my wife’s mother and stepfather need such care. And if we were closer to median earnings…
…but phase in that approach. Some of us are at a stage in life where retirement is looming (and where age discrimination would be an issue if we were forced to change jobs), and our retirement financing plans are predicated on certain assumptions about social security income. If the rules impacting me changed today, the potential delta in what I need to do today would potentially be huge.
At the same time, an 18 or 22 year-old entering the workforce would face a pretty small delta.
When they make changes to SS, I believe they would have to be phased in. I assume the following:
- generally no changes to benefits for those already receiving benefits (I say generally, as they could increase taxation on benefits or change the COLA formula going forward)
- likely no changes or minimal changes to benefits for those 10 years or fewer to retirement
- could be extensive changes for younger people.
As a young man, I didn’t plan on getting SS at all. Once I hit 40 or so, I figured I’d get something but that it might get a major haircut. Now that I’m getting closer to being able to claim, I think it’s pretty likely that I get my scheduled benefit.
I’m 10 years away from eligibility. I’ve instructed my financial guy to assume that SS will get the statutoy haircut when the trust fund accounting shows depleted. I think politics will force that haircut to not fully occur…but I also don’t want to count on that full benefit.
I’m further away than 10 years. My expectation is that SS benefits will be reduced by the time I can collect, perhaps for all or perhaps however they determine “the rich” will get less or nothing. If SS exists when I’m close to retirement, awesome, probably retire a couple years earlier.