Reply to 401k savings limit to increase in 2023

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Most people cannot afford to do this[/quote]

The people who cannot afford to do this don’t really need to save this much. Median HHI is around $78K and everyone knows that 20% of income needs to be set aside for retirement savings. That’s only $15,600 needed per year, so no need to save more by traditional standards.

The real concern is for those families that make more than $145K per year. The $29K allowance between 401k and IRA contributions isn’t really enough for these people. Congress should change the rules so that pre-tax contribution limits vary as a percentage of HHI so that everyone is permitted to save 20% of their income for retirement. This is especially true for high HHI families since social security replaces a lesser percentage of income as income increases. DH and I both work, but the $58K allowance between our collective retirement plans isn’t even 10% of our HHI. And we don’t even get a tax break on the IRA contributions anyway. So illogical and unfair. LMC and MC families don’t know how lucky they are![/quote]

You are really disgusting [/quote]

You seem to be confused regarding the way taxes work. Perhaps an explanation with more numbers?

[u]Household #1[/u]: MFJ couple with taxable income of $647,851 has a federal tax liability of $174,253 and an effective tax rate of 26.9%.

[u]Household #2[/u]: MFJ family of five with taxable income of $178,151 has a federal tax liability of $30,427 and an effective tax rate of only 17.1%.

These are the actual tax liabilities for 2022. Clearly, Household #2 is the more disgusting of the two, refusing to pay their fair share.

Even worse, we have two people in Household #1 that are paying $87,126.50 EACH into the federal government, yet five people in Household #2 paying only $6,085.40 EACH into the same federal government. Few things are more patently egregious than a person that stands by and watches another person be forced to pay 14X as much to receive the same benefits and services.

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So, by your reasoning...make less money?[/quote]

I mean I am all for lower income taxes..or at least tax rates based off of higher cost of living areas. 400k in DC is vastly different than 400k in Omaha. In Omaha, they live like kings. In DC, for a family of 5, they are solidly living a "middle class" existence. [/quote]

This is really out of touch.[/quote]

No it's not. Avg[b] single family[/b] home sale price in DC proper was just over 1M. With rates today, a mortgage on a 1M home (again, average..aka middle class)  with 20% down, and you're looking at 5,500 - 6,000/mo easily. If you have three kids, 400k/yr won't get you many luxurious with a 6k + mortgage.

If you net 60% of your salary  you're spending roughly 1/3 of your take home pay just on your mortgage. Sure you're not eating ramen, but you aren't driving around fancy cars and fancy international trips like the politicians think you are. [/quote]

I think what you're missing is that an actual middle class family with 3 kids who doesn't already own property simply doesn't have the option of a single family home in DC. It's a different scale of "basics" than someone making $150k, who's most likely looking outside DC and has to deal with the commute, or maybe able to find a rowhome east of the Anacostia, where the $400k family is unlikely to buy. The vast, vast majority of my friends with HHIs under $200k live across Maryland. [/quote]

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