Messing with the 401K program

401(k) Tax Changes May Be On Fast Track


Excerpt:

One of the more controversial and sweeping proposals pitched during the hearing would do away with tax deferrals for for 401(k) plans and IRAs, replacing them with a flat tax credit.

"The purpose of the retirement income system is to promote an adequate retirement, not to promote tax sheltering through 401(k)s," testified William Gale, a co-director of the Urban-Brookings Tax Policy Center at the Brookings Institution.

Not only do the existing tax rules provide less immediate benefit to low- and middle-income households, they are also relatively ineffective at inducing new saving," he says. "Contributions by high-income households to tax-subsidized retirement accounts are more likely to represent funds that are reshuffled from existing savings to take advantage of the tax benefit rather than a net new addition to saving. In other words, the current tax incentives to increase saving have relatively low bang for the buck because they merely subsidize shifting saving for high-income households rather than raising the total amount of saving in the economy."

Comment: 4 pages ... good read. My view ... GIANT mistake to mess with this