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- Sep 30, 2004
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Read recently on the Wall Street Journal
Grab Your Pitchforks, America, Your 401(K) May Need Defending from Congress
Not a well written article because you have to read several paragraphs before getting to the heart of the matter. It sounds like Congress is contemplating getting rid of the current 401K system where employees are able to sock money into retirement accounts pre-tax and instead move towards a system where your money is taxed first and then you can put that into a Roth style IRA. Most of us who are W2's contribute the max amount of $17,500 pre taxation and are usually near the top of the income tax bracket; which after federal, state, local, SS etc is close to 50% in taxes. With this alleged proposed system, won't the government essentially be stealing close to $9,000 from us per year? I don't see how that amount can be made up in a Roth IRA. Most of us when we retire will be at a much lower tax bracket because our cost of living will be a lot less and we will therefore be pulling less out of our retirement accounts per year, so I don't see how we will benefit just because we can withdraw from this Roth without being taxed. What I would also like to know is if employers would still have any incentive to match our contributions. If they do not, then that is another several thousand dollars per year taken from us.
Am I interpreting this article correctly? Many members of this forum are much more savvy than me with regards to finances so I wanted to post this article here for discussion.
Grab Your Pitchforks, America, Your 401(K) May Need Defending from Congress
Not a well written article because you have to read several paragraphs before getting to the heart of the matter. It sounds like Congress is contemplating getting rid of the current 401K system where employees are able to sock money into retirement accounts pre-tax and instead move towards a system where your money is taxed first and then you can put that into a Roth style IRA. Most of us who are W2's contribute the max amount of $17,500 pre taxation and are usually near the top of the income tax bracket; which after federal, state, local, SS etc is close to 50% in taxes. With this alleged proposed system, won't the government essentially be stealing close to $9,000 from us per year? I don't see how that amount can be made up in a Roth IRA. Most of us when we retire will be at a much lower tax bracket because our cost of living will be a lot less and we will therefore be pulling less out of our retirement accounts per year, so I don't see how we will benefit just because we can withdraw from this Roth without being taxed. What I would also like to know is if employers would still have any incentive to match our contributions. If they do not, then that is another several thousand dollars per year taken from us.
Am I interpreting this article correctly? Many members of this forum are much more savvy than me with regards to finances so I wanted to post this article here for discussion.