Reply to Should 401ks be phased out?

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Reply to "Should 401ks be phased out? "

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]Ymillions of Americans don’t take advantage of tax-favored retirement savings − or can't. Nearly half of workers have no access to a retirement plan at work, according to one AARP analysis.[/quote]
Ok? We don’t drag everyone else down because someone else’s employer doesn’t offer a 401k. That’s why IRAs were instituted. Or you could pass legislation requiring all employers to provide 401k access, the same as health insurance.[/quote]

Crappy companies many employees can’t afford to contribute or they offer them but no match. Or the scam in high turnover retail give a match but do vesting period which 95 percent of retail store employees never get.

Also the match is worth  more the more you make. A high earner in San Fran or NYC is in 40 percent tax bracket

The low income retail worker in Florida is in zero percent tax bracket.

Why does the high earner get a 40 percent tax saving on their contribution but low income a zero tax saving? [/quote]

Because as a high income employee, everything my spouse and I make over $701K is taxed federally at 37%.   We already pay high taxes on vast majority of our income.  The small ability to save $23K (and up to $30K once "we are old enough") and let it grow tax free is literally our ONLY tax break.  If we earn $2M, we pay $481K on that extra $1.3M just to the FEDERAL Government.  We also pay 1.45% medicare tax on ALL our W2 income, there is no cutoff---that's another $29K on the $2M.

For a lower income worker, the Roth IRA for the max is the best route for the first $7K (or whatever the max is for 2024).  Then the 401K up to the match (if any).  And as you stated, they already barely pay any taxes, if any at all.

Hint: the answer is the low income person is hardly paying any taxes at all!  Yet they still get to use all the Communal benefits in life, like roads, 911, fire protection, bridges, schools, etc.  In fact if they have kids, they likely get free preschool for them as well.

So as you can see, the vast majority of rich people are W2 earners and simply pay what's owed in taxes, which is a lot, as there are no real ways to avoid it.  So we pay for services and infrastructure that the low income worker gets to basically use for free (since they are not paying anything or much in taxes).  So no, I don't begrudge letting everyone utilize the 401k tax free savings.  It encourages everyone to save, even the Lower/middle income people not paying 40% taxes.  
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