NYT Reports GOP Wants to Limit 401(k) Contributions. Trump Tweets: “NO.”

By NTK Staff | 10.23.2017 @10:00am
NYT Reports GOP Wants to Limit 401(k) Contributions. Trump Tweets: “NO.”

On Friday, The New York Times reported 401(k) contribution limits could be part of tax reform. Trump refuted that report in a tweet on Monday: "NO change."

After a Friday report suggesting Republicans are ready to limit how much Americans can contribute tax-free to their 401(k) accounts, President Trump refuted those reports in a Monday morning tweet.

Trump said, instead, there “will be NO change to your 401(k).”

The New York Times reported on Friday that Republicans are ready to limit the tax-free amount Americans can contribute to the popular retirement accounts, currently $18,000 a year (and $24,000 a year for individuals over 50) to just $2,400 a year.

The proposals under discussion would potentially cap the annual amount workers can set aside to as low as $2,400 for 401(k) accounts, several lobbyists and consultants said on Friday. Workers may currently put up to $18,000 a year in 401(k) accounts without paying taxes upfront on that money; that figure rises to $24,000 for workers over 50. When workers retire and begin to draw income from those accounts, they pay taxes on the benefits.

…Such a move would be likely to push Americans to shift their savings to so-called Roth accounts, where contributions are taxed immediately, and not when they are drawn out as benefits. That would increase federal tax receipts for the short run.

According to the Times, the exclusions will cost the government about $115 billion in fiscal year (FY) 2018. Lowering the cap would bring in billions the government needs to cut taxes without adding to the national debt.

Left unmentioned by Trump were Individual Retirement Accounts (IRAs), which under current law allow $5,500 in tax-free contributions each year or $6,500 for those 50 and older.

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