Young Research & Publishing Inc.

Investment Research Since 1978

Compensation was paid to utilize rankings. Click here to read full disclosure.

  • About Us
    • Contributors
    • Archives
    • Dick Young’s Safe America
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Retirement Compounders®
  • Free Email Signup

Biden Seeking to Turn 401(k)s Into a Wealth Redistribution Scheme

November 16, 2020 By E.J. Smith

Vice President Joe Biden during a reception for the National Guard adjutants general of the states and territories of the United States at the Vice President’s Residence in Washington, D.C., on Feb. 22, 2010. (U.S. Army photo by Staff Sgt. Jim Greenhill) (Released)

Joe Biden wants to use the 401(k) system to redistribute wealth from wealthy taxpayers to lower-income savers. Daisy Maxey reports for Barron’s:

Life Comes at You Fast. Slow It Down with My Friday Email. It’s Free.

President-elect Joe Biden hopes to encourage lower- and middle-income workers to save more by changing the existing tax preferences for savings in retirement accounts. A divided Congress is likely to hinder his plans.

Currently, workers contribute pretax dollars to 401(k) or 403(b) retirement savings plans, then pay taxes when they withdraw money in retirement. This upfront tax break is more valuable for richer households because they fall into higher tax brackets.

Biden’s plan would institute tax credits for each dollar saved, leveling the playing field by offering the same incentive for retirement saving regardless of a worker’s income. He hasn’t said what percentage the credit would be, but the Urban-Brookings Tax Policy Center has estimated that a 26% credit would be roughly revenue-neutral over the first 20 years and beyond.

Currently someone who is single and making $120,000 falls into the 24% tax bracket. If he contributes $18,000, or 15% of his pay, to his 401(k), he would save $4,320 in taxes. But a single filer making $50,000 falls into the 12% tax bracket. If he contributes $7,500, or 15% of his pay, he would save $900 in taxes.

Assuming a 26% credit under Biden’s plan, the person earning $120,000 and contributing $18,000 to his plan would receive a tax credit of 26 cents on each dollar, or $4,680. However, the person earning $50,000 and saving $7,500 in his plan would receive a credit of $1,950, more than double what he would now save on taxes.

The initiative faces opposition from some asset managers and investment industry trade groups. Asset managers have in the past opposed plans that they feel might decrease usage of defined-contribution plans.

The Investment Company Institute, which represents mutual fund firms, said after news of the plan that it “supports tax deferral and the current, voluntary employer provided retirement system—and, as in the past, will oppose changes that undermine the success of this system for American savers.”

One result of Biden’s move might be to drive taxpayers into Roth IRAs and Roth 401(k)s, in which the taxes are paid up front. That would raise more revenue for a possible Biden administration. That’s most likely the real target of the plan.

Action Line: Talk with your tax professional about how Joe Biden’s change might affect your savings.

Originally posted on Your Survival Guy.

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • Biden’s Triple Threat to American Wealth and Prosperity
  • Beware the Coming 401(k) Annuity Storm
  • Wealth Management Pitfall: ESG
  • Author
  • Recent Posts
E.J. Smith
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West (RIP JB) and Paris.

Please get in touch with E.J. at ejsmith@youngresearch.com

Click here to sign up for my free monthly Survive & Thrive letter.
Latest posts by E.J. Smith (see all)
  • “No Way I’m Spending That Much on Those” - September 27, 2023
  • “You Didn’t Eat That Again, Did You?” - September 26, 2023
  • Your Survival Guy Fishing with Dolphins - September 25, 2023

Search Young Research

Most Popular

  • Wellington and Wellesley Funds Not Managed by Vanguard
  • The Single Worst Market Timing Event in History
  • “No Way I’m Spending That Much on Those”
  • The Power of a Compound Interest Table
  • Should America Move Closer to the Saudis, or Push them Away?
  • The War Machine's Manpower Problem
  • Vanguard Wellesley (VWINX) vs. Wellington (VWELX): Which Fund is Best?
  • Will the Fed Hold Up Its End of the Bargain?
  • Mr. Protect and Preserve: For Where We’re Going
  • “You Didn’t Eat That Again, Did You?”

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

The Importance of a Balanced Portfolio

Invest with Peace of Mind and Comfort

What Kind of Life Are You Investing For?

RSS The Latest at Richardcyoung.com

  • California – First to Enact Statewide Gun and Ammo Tax
  • “No Way I’m Spending That Much on Those”
  • How Much Can Grid Battery Storage Help?
  • Fighting Russian Power with a Hill of Crosses
  • “You Didn’t Eat That Again, Did You?”
  • Does Donald Trump Need the Pro-Life Vote?
  • What’s Happening with Iran?
  • L’Eau de France: A Fight for France’s Water
  • Speaking of Bad Ideas …
  • The Single Worst Market Timing Event in History

RSS The Latest at Yoursurvivalguy.com

  • “No Way I’m Spending That Much on Those”
  • What Trade Policy Serves America’s National Interest Best?
  • California Wants to Make the 2nd Amendment Unaffordable
  • “You Didn’t Eat That Again, Did You?”
  • Is McCarthy Up to the Task?
  • Rising Costs Are Hammering Commercial Real Estate
  • Your Survival Guy Fishing with Dolphins
  • Judge Shatters California High Capacity Magazine Ban
  • Is Your Water Safe to Drink? NOLA Residents Aren’t Sure
  • Wellington and Wellesley Funds Not Managed by Vanguard

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Copyright © 2023 | Terms & Conditions

 

Loading Comments...
 

    loading Cancel
    Post was not sent - check your email addresses!
    Email check failed, please try again
    Sorry, your blog cannot share posts by email.