Congress Is Proposing What!? Savers Need to Read

I spent over a decade as a state legislative staffer working on budget issues. During that time I experienced multiple instances of advocacy groups and the media taking ideas that were simply under discussion and making them out to be done-deal pieces of legislation.

I’m hoping that’s the case in this instance.

Last week, a blog post from Jason Zweig of The Wall Street Journal titled, “Grab Your Pitchforks, America, Your 401(k) May Need Defending from Congress,” discussed a possible change to 401(k)s as a result of upcoming tax reform legislation in Congress.

Unfortunately, unless you’re a subscriber to The Wall Street Journal, the pay firewall will likely keep you from reading the entire article.

The bottom line of the piece is that Congress may consider ideas floated by the Trump administration to remove pre-tax benefits from retirement accounts including 401(k)s and move them to after-tax benefits.

As Mr. Zweig says in his piece, “You could ultimately withdraw the money tax-free in retirement, but the incentive of getting an upfront tax break would be gone.”

No more incentives to fund retirement plans in order for the government to generate additional revenue.

As I said earlier, this proposal is associated with current efforts to revamp the U.S. tax system. A much-needed endeavor.

But removing an incentive for Americans to save for retirement? Not a prudent move in my opinion.

I’m sure the thinking goes something like this: The incentive is so small, and in many cases not completely understood by those who utilize it, that taking it away won’t matter to savings rates.

Maybe.

But the optics are just bad. Our government shouldn’t disincentivize personal saving, it should be doing more to promote it.

You see, our elected officials have chosen to ignore significant problems associated with America’s financial situation.

We, as a country, have accrued $20 Trillion in debt – an amount that increases daily.

Even with that tremendous debt load, the U.S. continues to spend more than it brings in each and ever year…which is the reason our debt continues to grow.

All the while, it’s a well-known fact that America’s safety net programs, Social Security, Medicare and Medicaid are unsustainable as they’re currently structured and funded.

There just won’t be the money to continue these programs in their current form as the years progress.

Which is why it is vital for individuals to take a more active role in saving for their own future.

Whether government programs will be there – in their current form at least –truly is in question.

And now we have proposals being discussed that would remove the incentive to save.

Not good.

We all need to be aware of, and involved with, the actions of our elected officials, especially as they pertain to our country’s financial sustainability.

The Committee for a Responsible Federal Budget is doing yeoman’s work trying to keep the message of a better fiscal and economic path before U.S. policymakers.

Its campaign to Fix the Debt is something of which any American who plans to utilize Social Security, obtain medical benefits from Medicare or Medicaid, or even live in a financially stable America needs to be aware.

Efforts to reform America’s tax policy should be applauded. To ensure future economic growth – more jobs, a stable and growing U.S. economy, etc. – its implementation is needed.

However, removing the incentive to save, no matter how small that incentive may be, is just wrong.

Please consider passing this post along to spread this important message. And take a few minutes to review the Fix the Debt information and become involved with that vital mission as well.

U.S. Capitol image courtesy of Martin Falbisoner (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons