Author Topic: Up front taxes on 401(k)?  (Read 405 times)

OurTown

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Up front taxes on 401(k)?
« on: September 01, 2017, 08:02:08 AM »
This is apparently still on the table:  https://www.washingtonpost.com/news/get-there/wp/2017/08/31/the-gop-is-looking-for-ways-to-pay-for-tax-cuts-your-401k-may-bear-the-cost/?utm_term=.4e4eebebdefa

They are still considering converting the 401(k) to a Roth-style account taxed on the front end.  What a disaster.

SeattleCPA

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Re: Up front taxes on 401(k)?
« Reply #1 on: September 01, 2017, 09:29:57 AM »
This is apparently still on the table:  https://www.washingtonpost.com/news/get-there/wp/2017/08/31/the-gop-is-looking-for-ways-to-pay-for-tax-cuts-your-401k-may-bear-the-cost/?utm_term=.4e4eebebdefa

They are still considering converting the 401(k) to a Roth-style account taxed on the front end.  What a disaster.

Probably best not to spend too much worrying or wondering about tax law proposals... Very, very hard to predict outcomes and come up with actionable steps before statutes passed.
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Goldielocks

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Re: Up front taxes on 401(k)?
« Reply #2 on: September 01, 2017, 09:41:30 AM »
You know,  if they remove the 10% penalty for early withdrawal, a lot of people will tap into some of their retirement early, and it would free up a lot more taxes in the near term.   Many people would pay that tax in years of average income, so it is all mid to upper bracket taxes to the government.

Given the prevalence of 401K loans, it would actually have minor impact on overall savings for retirements, and actually save people money.

protostache

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Re: Up front taxes on 401(k)?
« Reply #3 on: September 01, 2017, 10:29:43 AM »
If they do this they should go all the way. Nuke the 401(k) and traditional IRA going forward, remove the income restrictions on Roth accounts, and lift the cap on Roth contributions to $23,500. The employer match would become taxable into a company-run IRA.

NoStacheOhio

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Re: Up front taxes on 401(k)?
« Reply #4 on: September 01, 2017, 10:41:32 AM »
If they do this they should go all the way. Nuke the 401(k) and traditional IRA going forward, remove the income restrictions on Roth accounts, and lift the cap on Roth contributions to $23,500. The employer match would become taxable into a company-run IRA.

Yeah, honestly, I can't bring myself to care a whole lot either way. I'd obviously like to know what the rules are, but beyond that, I'll just deal. I pay may taxes, I will continue to pay my taxes in the future. I try to minimize the amount of tax I pay within the law, and that's about it.

If anything, Rothification of everything simplifies retirement, since you no longer have people (Mustacians) plotting out withdrawal strategies to minimize tax implications. Not that there's anything wrong with that, but it would free up time for, I don't know, reading a book or building something cool.

I wouldn't be thrilled if they taxed my current balance, but as long as I could pay the taxes out of that balance without a penalty, I could live with it.
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Rcc

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Re: Up front taxes on 401(k)?
« Reply #5 on: September 02, 2017, 06:39:02 AM »
Dropping in the source article:

http://www.politico.com/story/2017/08/22/trumps-team-and-lawmakers-making-strides-on-tax-reform-plan-241873

So it's something to keep an ear out for, but given the quantity of orgs and folks that would be against it, I'm doubtful it would fly.