Trump says there will be no change to 401(k) plans
President Donald Trump tweeted Monday there will be no change to a popular retirement savings plan under the new GOP tax bill. "There will be NO change to your 401(k). This has always been a great and popular middle class tax break that works, and it stays!" Trump said in a tweet.
Tweet Right now, taxpayers can set aside a certain amount in 401(k) retirement savings plans without paying taxes up front. Recent discussion has raised lowering that tax-deferred amount in order to boost tax revenue. Meanwhile, the Internal Revenue Service has announced higher contribution limits for 2018. Next year, workers can contribute up to $18,500 in their 401(k), up from $18,000 for 2017. For those age 50 or older, a so-called catchup contribution of $6,000 is permitted for a total of $24,500. Lower thresholds discussed Lawmakers discussed reducing that tax-deductible amount to as low as $2,400, according to published reports. That's below the $5,500 allowed for Individual Retirement Accounts (with a $1,000 catchup contribution for those age 50 and older). While the allure of a tax deduction is one of the appeals of contributing to a 401(k) plan, participants are taxed at ordinary income rates when they take withdrawals from their account once they reach age 59½. Contributions to a Roth IRA or a Roth 401(k), on the other hand, are not tax-deductible. Yet on the other end, in retirement, the withdrawals are tax-free. More than 94 million American workers are covered by defined contribution plans like 401(k)s, according to a recent Vanguard study. Total assets in such plans stand above $7 trillion.
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