Future of 401k program
Moderator: Aitrus
-
- Posts: 4330
- Joined: Tue Aug 19, 2008 8:51 pm
Future of 401k program
Did everybody read the paper proposing eliminating the 401k tax deferred program?
Re: Future of 401k program
Which paper is that?crondanet5 wrote: ↑Thu Feb 08, 2024 3:48 pm Did everybody read the paper proposing eliminating the 401k tax deferred program?
Owner/creator of TSPcalc.com - "Know your numbers"
Re: Future of 401k program
This article reference the paper I think crondanet5 is referring to
https://www.forbes.com/sites/andrewbigg ... 318f9e7033
another....https://www.nasdaq.com/articles/social- ... -heres-the
https://www.forbes.com/sites/andrewbigg ... 318f9e7033
another....https://www.nasdaq.com/articles/social- ... -heres-the
Re: Future of 401k program
I started contributing 10% to TSP when I was 1st able to with the assumption that SS might not be around by the time I retired and don't plan on taking it until age 70 right about the time that SS is supposed to be running out of funds.
Interesting article addressing crisis in early 1980's https://www.brookings.edu/articles/the- ... ty-reform/
The deal increased full retirement age from 65 to 66-67 years old for those born in 1943 or after.
About the same time, they changed from CSRS to FERS and government employees were put into Social Security with SS & TSP to supplement the smaller pension.
With the changes under the SECURE Act, as Baby Boomers & older people die off, those retirement funds will be freed up for non-spouse beneficiaries as they are required to withdraw funds within 10 years.
Assuming you have no spouse and one beneficiary, if you die this year with $1M in traditional TSP your beneficiary will have to with draw at least $100k/year if they split it up over 10 years (putting them in at least the 22% bracket) or if they take all of the distribution at once, they will pay between 30-32% in taxes depending on their filing status. This is with the current lower tax rates through 2025.
For those with spouses, take a look at the difference between Married and Single tax brackets for when one of you die. This is why it is advisable to have some type of drawdown plan rather than just waiting for RMDs to kick in and make sure you spouse or beneficiaries know what to do in setting up an inherited IRA or TSP if you have a significant amount saved.
With these changes, more people are contributing to Roth 401K, TSP etc. and some are converting traditional funds to Roth, which increases the taxes being paid currently. There are many moving parts but I doubt they will eliminate any of the retirement savings vehicles any time soon. They are more likely to revert back to. the higher tax rates or raise taxes than eliminate retirement savings.
Interesting article addressing crisis in early 1980's https://www.brookings.edu/articles/the- ... ty-reform/
The deal increased full retirement age from 65 to 66-67 years old for those born in 1943 or after.
About the same time, they changed from CSRS to FERS and government employees were put into Social Security with SS & TSP to supplement the smaller pension.
With the changes under the SECURE Act, as Baby Boomers & older people die off, those retirement funds will be freed up for non-spouse beneficiaries as they are required to withdraw funds within 10 years.
Assuming you have no spouse and one beneficiary, if you die this year with $1M in traditional TSP your beneficiary will have to with draw at least $100k/year if they split it up over 10 years (putting them in at least the 22% bracket) or if they take all of the distribution at once, they will pay between 30-32% in taxes depending on their filing status. This is with the current lower tax rates through 2025.
For those with spouses, take a look at the difference between Married and Single tax brackets for when one of you die. This is why it is advisable to have some type of drawdown plan rather than just waiting for RMDs to kick in and make sure you spouse or beneficiaries know what to do in setting up an inherited IRA or TSP if you have a significant amount saved.
With these changes, more people are contributing to Roth 401K, TSP etc. and some are converting traditional funds to Roth, which increases the taxes being paid currently. There are many moving parts but I doubt they will eliminate any of the retirement savings vehicles any time soon. They are more likely to revert back to. the higher tax rates or raise taxes than eliminate retirement savings.
Re: Future of 401k program
A couple of months ago I read about IBM changing their retirement system entirely. What worried me when reading that, they were some of the first to make use of the 401k loophole. While I think we're locked in (fingers crossed), future generations might have to deal with this new type of plan, which means a whole lot less for retirement (assuming you weren't sitting in the G Fund all the time).
https://www.cnbc.com/2023/11/30/what-ib ... rkers.html
https://www.cnbc.com/2023/11/30/what-ib ... rkers.html
-
- Posts: 4330
- Joined: Tue Aug 19, 2008 8:51 pm
Re: Future of 401k program
I believe the story was on a Microsoft feed. Their position was by eliminating the tax deferred program money invested in a retirement account would pay annual taxes and those taxes could be used to support the Social Secuity Program.
Re: Future of 401k program
Secure Act Basics https://www.kiplinger.com/article/retir ... -know.html
Secure Act 2.0 https://www.fidelity.com/learning-cente ... cure-act-2
I really wish they still had Stretch IRA available.
https://news.bloombergtax.com/tax-insig ... we-move-on
Secure Act 2.0 https://www.fidelity.com/learning-cente ... cure-act-2
I really wish they still had Stretch IRA available.
https://news.bloombergtax.com/tax-insig ... we-move-on
- Scarfinger
- Posts: 811
- Joined: Mon Jan 30, 2012 12:00 am
Re: Future of 401k program
Thanks for the links Evilanne. Good Info.
I am just an average Joe. I have no clue to what the market will do.
Paul Merriman 2 fund strat: (age - 25) x2.5 = TDF + balance into S fund or variation ofTimboSlice wrote: "People really need to stop overthinking this."
Fund Prices2024-04-26
Fund | Price | Day | YTD |
G | $18.21 | 0.01% | 1.36% |
F | $18.63 | 0.27% | -3.10% |
C | $79.85 | 1.02% | 7.38% |
S | $78.29 | 0.78% | 1.55% |
I | $41.48 | 0.50% | 3.22% |
L2065 | $15.89 | 0.80% | 5.08% |
L2060 | $15.89 | 0.80% | 5.08% |
L2055 | $15.89 | 0.80% | 5.08% |
L2050 | $31.87 | 0.68% | 4.13% |
L2045 | $14.54 | 0.64% | 3.94% |
L2040 | $53.14 | 0.60% | 3.78% |
L2035 | $14.04 | 0.55% | 3.58% |
L2030 | $46.78 | 0.50% | 3.41% |
L2025 | $13.02 | 0.29% | 2.45% |
Linc | $25.43 | 0.23% | 2.10% |