Should 401ks be phased out?

[Anonymous]

Anonymous wrote:I will use my firm as an example.

We do 401k with a 6 percent match. We also for VP and up have a 457 (b)

Someone who is a single VP over 50 making 300k a year can put in 30k into 401k with a 18k match and 30k in 457 (b) including match

So they can put in 78k a year.

Now a single person over 50 in operations might make 50k a year, she can only afford to do 6 percent and gets 6 percent match so she is putting in 6k a year.

78k a year even with zero percent gains between 50 and 67 is $936,000 and 6k a year between 50-67 is $72,000.

tl;dr - people who make more money are able to save more money. Not exactly man bites dog news.

[Anonymous]

Anonymous wrote:

Anonymous wrote:401k should not transfer tax liability to a new state. It is deferred compensation and should be taxed in the state where it was earned, like CA does for RSU awards.

401k is for the MC/UMC, not the rich.

I feel this is fair, even though I have a place in a low tax zone!

This is dumbest idea in this thread, and wow, is there a lot of competition.

Aside from the legal inaccuracies (a 401k is not deferred compensation), and practical difficulties (people move jobs/locations often, so you'd be forcing senior citizens to file taxes in multiple states, when all they have is ordinary income), think about the impact on the DC region.

I (and millions of others in the DC area) can just as easily live in any of the three local jurisdictions. Your suggestion is that I am going to be stuck paying the tax rates of my current residence throughout my retirement. For a variety of reasons, at the moment I have decided that I am willing to suffer the higher tax rates of MoCo at the moment, even though it would unquestionably save me a significant amount of money if I lived in VA. That calculus changes considerable if I am committing to these tax rates for my entire life, and I imagine it would for many others as well. The impact on MoCo's tax base if this lunacy were enacted is hard to describe. It sure would juice Va's property values, though.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Old people Genx and older 401k should be taxed based on their net worth not income

But they were already taxed on the money that is now net worth.

Money going INTO 401ks is not taxed ---

Deferred tax, but taxed, nonetheless.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I find it weird that OP wants to phase out 401ks because high tax states may be missing out on even more taxes as people with 401ks flee the state when they retire to escape those taxes.

It's almost as though these states designed their taxes to encourage retirees to leave. The state can fix that if that was not the incentive they hoped to achieve.

Obviously we need higher national (or interstate compact) tax and lower state tax to prevent a race to the bottom, but individual states can't force that.

States can set taxes at whatever they like.

As long as there are states without taxes, the rich will just move to those for at least 6 months/year to avoid the state taxes. Not hard to do

It's amazing that many states refuse to understand this. Personally, I stomach DC income taxes but am seriously thinking of leaving over the estate tax, which amounts to 0.6% of total DC tax revenue. Why drive higher income residents out over a tax that in aggregate collects so little?

Because it's a lot easier to tax the dead than it is to take the living and working? Why do you care about the estate tax -- you can't take the money with you. And if you're a true conservative, you should expect your children to bootstrap it, not wait for an inheritance.

[Anonymous]

Don't forget there's a savers tax credit for low-income workers.

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Old people Genx and older 401k should be taxed based on their net worth not income

But they were already taxed on the money that is now net worth.

Money going INTO 401ks is not taxed ---

But all of it coming OUT is....what's your point?

Their point is people avoid state income taxes during the distribution phase by moving to a zero income tax state.

Their proposal is to make everyone feudal serfs of the state so they can't move strategically in retirement.

Or make only you save on Fed taxes when you put in. MoCo, NYC, CA lose those tax dollars forever if people move. Plus even if people stay they are in a way lower tax bracket in retirement and it is delayed by up to 50 years to get payment

Delayed gratification that many people never live to use. They die and an heir gets to spend it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I will use my firm as an example.

We do 401k with a 6 percent match. We also for VP and up have a 457 (b)

Someone who is a single VP over 50 making 300k a year can put in 30k into 401k with a 18k match and 30k in 457 (b) including match

So they can put in 78k a year.

Now a single person over 50 in operations might make 50k a year, she can only afford to do 6 percent and gets 6 percent match so she is putting in 6k a year.

78k a year even with zero percent gains between 50 and 67 is $936,000 and 6k a year between 50-67 is $72,000.

tl;dr - people who make more money are able to save more money. Not exactly man bites dog news.

But they don't think it's fair that someone who makes more than them gets a better "tax break". Completely forgetting that person is paying 37% fed, 1.45% medicare and whatever their state tax is. So yeah, they are paying a lot and this is one of the few "tax breaks" they actually get to take advantage of

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I find it weird that OP wants to phase out 401ks because high tax states may be missing out on even more taxes as people with 401ks flee the state when they retire to escape those taxes.

It's almost as though these states designed their taxes to encourage retirees to leave. The state can fix that if that was not the incentive they hoped to achieve.

Obviously we need higher national (or interstate compact) tax and lower state tax to prevent a race to the bottom, but individual states can't force that.

States can set taxes at whatever they like.

As long as there are states without taxes, the rich will just move to those for at least 6 months/year to avoid the state taxes. Not hard to do

It's amazing that many states refuse to understand this. Personally, I stomach DC income taxes but am seriously thinking of leaving over the estate tax, which amounts to 0.6% of total DC tax revenue. Why drive higher income residents out over a tax that in aggregate collects so little?

Because it's a lot easier to tax the dead than it is to take the living and working? Why do you care about the estate tax -- you can't take the money with you. And if you're a true conservative, you should expect your children to bootstrap it, not wait for an inheritance.

or if you are a smart person, you consult an estate lawyer and utilize a trust to bypass both federal and state/DC level estate taxes. There are plenty of legal options for doing this. So the fact that people don't is stunning

[Anonymous]

You pro 401k people I have a question. A married person with a stay at home spouse only gets to contribute 1/2 as much as dual income couple to a 401k.

How is that fair?

[Anonymous]

Anonymous wrote:You pro 401k people I have a question. A married person with a stay at home spouse only gets to contribute 1/2 as much as dual income couple to a 401k.

How is that fair?

Um, the person not contributing to the 401k also doesn't have to work to earn a living?

[Anonymous]

Anonymous wrote:You pro 401k people I have a question. A married person with a stay at home spouse only gets to contribute 1/2 as much as dual income couple to a 401k.

How is that fair?

If you choose to work, you can contribute to a 401K. Not that difficult to understand. I you don't work for pay, you don't get to use a 401K

[Anonymous]

Anonymous wrote:You pro 401k people I have a question. A married person with a stay at home spouse only gets to contribute 1/2 as much as dual income couple to a 401k.

How is that fair?

Omg, cry about it. That married person without a job can still open up an IRA, invest $10000 into ibonds, or start a small company so they can have their own self employed 401k. Go sell shit on Etsy, lol. You can contribute the max and even more with a self employed 401k.


Stop blaming others or the system and start taking responsibility for your own life.

[Anonymous]

Anonymous wrote:You pro 401k people I have a question. A married person with a stay at home spouse only gets to contribute 1/2 as much as dual income couple to a 401k.

How is that fair?

You’re already supporting yourself on 1 income. 401k contributions are based on each person’s income. If you needed two incomes to support your household then you could both contribute to a 401k.

You’re VERY financially lucky to only need 1 income to support a family in this area.

[Anonymous]

Anonymous wrote:401k should not transfer tax liability to a new state. It is deferred compensation and should be taxed in the state where it was earned, like CA does for RSU awards.

401k is for the MC/UMC, not the rich.

I agree with this too. Deferred taxes and then they never pay the tax (and I grew up in Florida).

[Anonymous]

Anonymous wrote:Don't forget there's a savers tax credit for low-income workers.

https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-savings-contributions-savers-credit

And it’s a tax credit, not a deduction like the 401(k).