Three retirement savings tactics that may disappear

Maxing out contributions to retirement plans to avoid taxes has become a common strategy, but three popular techniques could be cut under proposals afloat in Washington. Here’s a look at the proposed changes, and who would be affected by them.

Capping retirement plan tax benefits

Current law encourages taxpayers to save for retirement by deferring income taxes on money they contribute to retirement plans — and on the earnings on those contributions — until they withdraw the money later in life. However, since higher earners are taxed at higher rates, the biggest rewards from retirement incentives also go to high earners. Someone in the highest personal tax bracket, the 39.6% bracket, saves 39.6 cents on the dollar by participating in a 401(k) plan. For a low earner in the 15% bracket, it’s 15 cents on the dollar.

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Damian Sylvia

Retirement Income Solutions