Limit on 401(k) Savings? It’s About Paying for Tax Cuts<br />A proposal to slash the amount of money workers can put in tax-deferred retirement accounts set off alarms among savers and members of the financial services industry, who contend<br />that limiting the tax break would discourage contributions to 401(k) plans.<br />And depending on future tax law, Mr. Choi said that retirees with Roth accounts could get by with smaller contributions than those with 401(k)’s<br />because they won’t have to pay as much tax on the savings they withdraw<br />Nearly 40 years later, 401(k) accounts are the most common employer-sponsored retirement plans<br />and a raft on which millions of Americans hope to float through retirement.<br />Instead, workers were left with the responsibility of saving for retirement themselves,<br />with individual retirement accounts or 401(k)s. The switch has meant less security.<br />Details of the Republican tax plan have not yet been released,<br />but the talk has been of imposing a cap of $2,400 a year on tax-deferred contributions to 401(k) plans — a sharp reduction from the current ceiling of $18,000 a year for people under 50, and $24,000 for people age 50 and above.<br />After all, no one had previously used the unremarkable section of the tax code called 401(k)<br />to defer paying taxes on money that rank-and-file workers set aside for retirement.<br />Andrew Biggs, formerly a principal deputy commissioner of the Social Security Administration, said<br />that for most people, it makes little difference whether they pay taxes on retirement savings now or in the future.
