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What To Know About 401k Plans Amid Tax Changes Talk

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Where the 403b /457 fits in all this talk no one knows yet

Congress is looking for ways to raise revenue as part of a tax overhaul plan, and one of the methods reportedly under consideration is to curtail how much pretax money workers can contribute to their 401(k) and similar accounts.

https://www.washingtonpost.com/national/what-to-know-about-401k-plans-amid-talk-of-tax-change/2017/10/23/49593130-b850-11e7-9b93-b97043e57a22_story.html?utm_term=.5cc2295393b2

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I heard the $2,400 figure being talked about the other day, but I didn't take it seriously.  This would be devastating. 

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I don't think it will pass.  

Of course some folks won't care because they don't save anywhere near the limit. But if they are going to reduce the limits, 2,400 is a ridiculously low amount. Seems radical.

 

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I suspect the plan is to keep the 18k employee contribution limit but only 2.5k can be traditional, the rest would be Roth. This would give them the tax they need to balance the tax cuts. It probably assumes that the current level of traditional 401k contributions would continue as Roth 401k contributions?? Which doesn't seem likely does it? I agree with Ed, it won't happen.

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I suspect the plan is to keep the 18k employee contribution limit but only 2.5k can be traditional, the rest would be Roth. 

That sort of makes sense and a most logical outcome if it does pass but losing the tax deduction will hurt how much a family will be able to put away even further since it won't lower your tax rate. With further tinkering of Social Security which I think will happen sooner or later, its not a good scenario. Look what young teachers are paying into their state sponsored retirement plans now. Much more than I did. Actually I payed zero into it!! Not the case in Virginia anymore. All of this can't be good for families already strapped trying to make ends meet with rising health care costs, daycare, and everything else they have to take care of. We are on the verge of forcing the retirement savings rate even lower.

Put on top of that  that teachers will continue to be ripped off with high fee annuity plans. I don't see that trend abating considering how many active salespeople and companies seem to be out there in droves selling these awful products. Plus the current political thought is let the free market do its thing and not interfere even if its screwing people.

I better stop this post. I am getting disgusted.

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