Save My 401(k)

Posted on Dec 21, 2012 by  in Changes in the Law: What You Should Know, In the News, Retirement Readiness

The 401(k) plan is the most successful savings program in the history of our country.   People who have access to an employer-sponsored retirement plan are 15 times more likely to save for retirement than those working for employers without one.  No other alternative even comes close to the level of participation the 401(k) plan has achieved.  As members of Congress go to work on tax reform, we need to make sure they understand the critical role played by 401(k) plans in promoting retirement readiness and encourage them to preserve the current contribution limits for retirement plan contributions.

Unfortunately, current congressional budget rules treat tax deferrals to a 401(k) plan the same as permanent tax reductions, such as the mortgage interest deduction.  Treating tax deferrals in the same way as permanent tax deductions is short-sighted.  Our elected officials need to realize that deferring taxation until retirement (when the accumulated savings are taxed) is not the same as a permanent tax deduction.  

We need to encourage our elected officials to make policy decisions that promote individual savings.  Lowering the 401(k) limits will do the opposite; it will decrease the incentive for people to save.  Even worse, contribution limit reductions would cause many small employers to eliminate their 401(k) plan altogether because the benefits would no longer outweigh cost to administer the plan.

Tax policy should not interfere with retirement policy.  In this country, where the 401(k) Plan is effectively the only private sector retirement plan available to most employees, if Congress cuts the amount employees and companies can contribute to their retirement plans, everyone loses.  I urge you to contact your elected officials and ask them to save the 401(k) – the most effective retirement savings vehicle ever created.   The American Society of Pension Professionals and Actuaries has made it easy by creating a grass roots campaign called Save my 401k to encourage members of Congress to support 401(k) plans.  Please join me in helping to ensure that this critical and successful retirement savings program remains strong for years to come.

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