Watch Out: Your 401(k) Is Being Targeted
While attending a terrific symposium recently on the retirement challenges women face, I came away with a stark realization: Washington has a bull’s-eye on every American’s 401(k).
Why would Congress and the president target retirement savings plans? Especially when they’re so highly valued by the American public?! The answer, to paraphrase bank robber Willie Sutton, is because that’s where the money is.
Trimming Retirement Plans to Shrink the Deficit! The tax breaks for 401(k) and similar retirement savings plans add up to $100 billion a year and will cost the government an estimated $429 billion from 2013 to 2017. That’s more than the mortgage interest deduction.
These plans are also tempting targets politically, because 80 percent of their benefits go to the top 20 percent of earners, according to the Tax Policy Center. That’s why liberal- leaning groups, like the Pension Rights Center, say the plans’ tax breaks should be trimmed.
Andrea Coombes, the retirement columnist for The Wall Street Journal’s Marketwatch site, recently wrote: “Some say it’s inevitable lawmakers will at least look at limiting the tax benefits of such plans.” Certain employers may stop offering 401(k)s if benefits are cut for higher-earning employees.