WASHINGTON _ Almost 12 hours after President Donald Trump ruled out changes to 401(k) retirement-savings plans, a top congressional tax writer indicated that retirement savings remains under review.
"We are taking a fresh look at the savings plans, at the savings vehicles," House Ways and Means Chairman Kevin Brady said Monday evening during the annual meeting of the Securities Industry and Financial Markets Association. "Bottom line is, we want Americans to save more, and save earlier in their lives and earlier in their incomes," said Brady, a Texas Republican.
Speculation about the tax treatment of 401(k) retirement accounts has been swirling in Washington for months, as Congress tries to come up with revenue raisers to offset the historic tax cuts Trump has promised. A New York Times report on Friday said Republicans have considered reducing the cap on the annual amount workers can set aside for their 401(k)s to as little as $2,400 annually. The move would pull future tax revenues forward by requiring Americans to pay taxes on retirement savings now instead of when they tap their nest eggs.
Workers can currently put as much as $18,000 _ or as much as $24,000 for workers over 50 _ in those accounts each year from their pretax income. One alternative plan would call for people to fund their retirement with after-tax earnings, but allow them to withdraw the money tax-free later on, according to Sen. Rob Portman, an Ohio Republican _ essentially moving toward the model for "Roth" individual retirement accounts.
Giant asset managers such as Vanguard Group and Fidelity Investments have said they fear that cutting 401(k) tax deferrals to just $2,400 a year would reduce the American public's notoriously low savings rate even more, jeopardizing their retirement income.
