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401k Tax Cuts Expected in Trump’s Budget Plan

401k tax cuts

What is the fate of 401k tax cuts?

Pending the Trump Administration tax proposals and the President’s new tax plan, most industry professionals are taking a measured view in assessing the impact on 401k plans. Predicting a major cut in 401k plan deductions is the province of hysteria driven by partisan politics and is not a likely outcome. Still, some industry professionals posit the that retirement savers will lose a significant tax benefit under the Trump Administration.  Keep in mind, this is idle speculation at best and not based in fact.

According to USAToday, one proposal is to move some of the 401k contributions to after tax Roth IRA or Roth 401k plans in order to record tax revenue immediately which would be worth $1.5 trillion over the next decade.

Another proposal is to tax gains of investments within a retirement plan which would put those plans at a disadvantage to some taxable accounts where gains are taken when the investments are sold at capital gain rates. There’s another $48-$60 billion to be realized by the government from 2018-2015 by taxing gains within a retirement account.

A 2016 proposal in Congress would cap the tax benefit at 25% hurting business owners and high earners who would have less incentives to advocate or even offer 401k plans at a time when engagement of senior management is more critical than ever.

Some may wonder why the government would want to make retirement plans less attractive when know that most people are not saving enough for retirement and that 50% of workers do not have access at work. But 401k plans are most beneficial for the middle class whereas Trump’s political base consists of lower income workers and very high earners for whom these plans are less attractive. Corporate leaders and business owners might be willing to take a hit on their DC plan to get better corporate tax rates.

Timothy Kelly
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Timothy Kelly

Tim Kelly is the Founder of ForexTV. Since its inception in 2003, ForexTV has been a global leader in forex news and has expanded its news coverage to multiple industries. ForexTV is now one of the most recognized brands in global financial news. Mr. Kelly was also the creator and co-founder of 401kTV where he served as Managing Editor until April 2017.

Mr. Kelly is an expert in online marketing, search engine optimization, content development and content distribution. He has consulted some of the top brokerages, media companies and financial exchanges on online marketing and content management including: The New York Board of Trade, Chicago Board Options Exchange, International Business Times, Briefing.com, Bloomberg and Bridge Information Systems and 401kTV.

He continues to be a regular market analyst and writer for ForexTV.com. He holds a Series 3 and Series 34 CFTC registration and formerly was a Commodities Trading Advisor (CTA). Tim is also an expert and specialist in Ichimoku technical analysis. He was also a licensed Property & Casualty; Life, Accident & Health Insurance Producer in New York State.

In addition to writing about the financial markets, Mr. Kelly writes extensively about online marketing and content marketing.

Mr. Kelly attended Boston College where he studied English Literature and Economics, and also attended the University of Siena, Italy where he studied studio art.

Mr. Kelly has been a decades-long community volunteer in his hometown of Long Island where he established the community assistance foundation, Kelly's Heroes. He has also been a coach of Youth Lacrosse for over 10 years. Prior to volunteering in youth sports, Mr. Kelly was involved in the Inner City Scholarship program administered by the Archdiocese of New York.

Before creating ForexTV, Mr, Kelly was Sr. VP Global Marketing for Bridge Information Systems, the world’s second largest financial market data vendor. Prior to Bridge, Mr. Kelly was a team leader of Media at Bloomberg Financial Markets, where he created Bloomberg Personal Magazine with an initial circulation of over 7 million copies monthly.
Timothy Kelly
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