WASHINGTON — House Majority Leader Kevin McCarthy said Sunday the GOP tax plan out this week will “expand” thꩵe overall amoun🍬t Americans can invest in 401(k) retirement accounts.
He also suggests the tax plan out Wednesday
“The way we’ll look at the 401(k) is we’ll protect it,” McCarthy said on Fox News’ “Sunday Morning Futures.” “We’ll expand the amount that you can invest, but we’ll also give you an option to actually not be taxed later in life — not to have that tax burden (looming) over you in the future, but actually have greater income in the future.”
If there is more prioritization to Roth-style planꦗs, the IRS would collec꧟t tax money immediately on the investment, whereas traditional 401(k) plans are tax-deferred until withdrawal for retirement.
The details are being worked out in the House Ways💖 and Means Committee, where Chairman Kevin Brady (R-Texas) confirmed they are interested in expanding the caps on “overall” retirement savin👍gs and looking at pre-tax and post-tax options.
President Trump initially denounced proposals😼 to limit the amount of pre-tax dollars that can be deferred in retirement savings, saying the middle-class benefit must be preserved.
The comments by McCarthy ensuring that Americans are “not taxed later in life” signal the tax treatment for Roth-IRA plans💝 where individuals invest their after-tax dollars i𒈔nto accounts and can withdraw cash upon retirement tax-free.
Nevin Adams, a spokesman for t💟he American Retirement Association, cautioned that any change to retirement accounts should be aimed at helping workers ♔save, “rather than solely for the purpose of raising revenue for other tax objectives.”
Previous news reports suggested House Republicans were mulling a tax plan to cap 401(k) employee pre-tax contrib🔯utions to $2,൲400 a year and then force any retirement savings beyond that to be made on a Roth (after-tax) basis.
The report by Employee Benefit Research Institute found that such a change would impact workers throug♊hout all age and incom𝔍e brackets.
The average employee 401(k) contribution for workers making betwe꧒en $10,000 and $24,999 was $3,203 in 2015 — well above the cap.