Benjamin Franklin famously said, “In this world nothing can be said to be certain, except death and taxes.”
A new law being considered in Congress would allow them to tax the 401K’s of hardworking Americans.
In the past, companies offered pensions to their long-time employees, but now, Americans are expected to fund their own retirement through their 401K.
The new proposal being considered in Congress would allow them to tax your 401K, bringing in an additional $1.5 trillion in tax revenue. A second raise would bring in between $48 billion to $60 billion by 2025.
Conservative Tribune reports:
Currently, income that Americans funnel into their 401(k) plans plans can be deducted from their income taxes. Moreover, investment gains in their 401(k) accounts can be accrued over time without their owners needing to worry about paying any taxes on those dividends, as long as they leave the accounts untouched. If Congress actually passed the new taxes, these benefits would go away, and that’s a big problem.
For one, tax-deferred 401(k) accounts play a big role in fostering reliable retirement, according to David Kabiller, co-founder of AQR Capital Management. He explained to The Wall Street Journal that if these accounts — as well as similar retirement boosters such as pensions, supplemental savings and Social Security — were to be eliminated or restricted, “you make achieving a secure retirement more challenging.”
According to the “Wall Street Journal,” Americans are paying insane fees in their 401K’s that offer lousy returns.
“Retirement savers in the private workforce pay outlandish management fees that can exceed 1 percent annually on lousy investment choices; members of Congress pay a maximum of 0.039 percent for funds that all but guarantee matching the market,” The Journal reported.
Bradford Campbell, a partner in the law firm Drinker Biddle & Reath, suggested Congress should be willing to offer complementary legislation targeting their own pensions if they want to target those of the average American.
“There should be equal sacrifice,” he said. “It’d be very hard for them to justify not doing that.”