Democratic Presidential hopeful and former Vice-President, Joe Biden has proposed slashing much of the tax deduction benefit for all Traditional 401k and IRA accounts, instead capping them with a flat-tax deduction. Biden tax policies could end up costing you tens or hundreds of thousands of additional dollars throughout your retirement years. Will a Roth 401k fix the traditional IRA/401k?
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Ben Harris, a Biden adviser who served as the nominee’s chief economist during his vice presidency, emphasized
“If I’m in the zero percent tax bracket, and I’m paying payroll taxes, not income taxes, I don’t get any real benefit from putting a dollar in the 401k” Harris said. “But if someone’s in that top tax bracket, they get 37 cents on the dollar for every dollar they put in there,” he concluded.
And this is exactly where these politicians get it wrong. No! You are not correct, Mr. Harris. It is not that the zero percent tax bracket person didn’t see any benefit; they are already at zero percent tax so they effectively already have a 100% tax break. Whereas, someone of higher income only gets 37cents for every dollar written off, they pay taxes on the remainder.
I am not sure how this is hard to understand? Of course, honestly, the politicians are just pandering to financially illiterate individuals. I do not blame the people here, the politicians from both parties for decades, have fought to keep people ignorant of how finances work. That is why YouTube channels like this and Graham Stephan, Meet Kevin, etc., are so important!
What is not clear, and in all transparency, I am only speculating about this fact. Would Biden’s plan also remove the tax credit incentive for businesses to match contributions? If, as I suspect, the Joe Biden and Kamala Harris plan is to brand “rich businesses” as evil, one could easily deduce they would remove tax incentives for businesses offering 401k and IRA plans. For example, currently, at my business AutoCorner, we offer a 3% matching contribution, if we lose our tax credits, would I still continue to provide the matching? Maybe, maybe, not. I feel many small business owners will be in the same boat, wondering what they can afford to do.
⚠️ ⚠️ ⚖️⚖️ I am not a lawyer, CPA, tax advisor, realtor, financial advisor, etc., I have absolutely no licenses/certifications in anything related to these industries, I am just a dude on the internet. So, in full disclosure: the information I provide here is for “entertainment purposes only!” You should seek counsel from competent and certified individuals if you have questions. I may receive commissions when you use my affiliate links. 401k vs roth 401k roth 401k vs roth ira…(read more)
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All Democrats are criminal trash! We had it SO GOOD under Trump!!
Well guess what it's a year later and our 401k's are utterly destroyed !! JOE BIDEN …you will be the worst president in our history …POS !!!
Fuck all Democrats!!!!!
Sigh they should just put a cap for the after tax Roth 401k conversions. I.e. 400k annual income as a phase out . Really silly all this
Democratic strategy: convince financially illiterate people that people that this only affects rich people. Take money from everyone in the process, and continue to say it’s rich people’s fault. Making people more dependent on the government.
I lost my many tax deductions because of Trump's massive tax law change, I now pay more in Federal Tax than I ever have in my life, hoping Biden begins to even out the playing field and make corporations and the rich pay their fair of taxes!!! I am literally working now to pay my Federal Taxes because of Trump! Hoping Dems fix the unfair tax burden!!!
Socialism would solve this capitalist problem.
People at the bottom of the tax bracket should be using a ROTH and not the Traditional IRA.
WOW. THIS. GUY. BIDEN. IS. FUCKING THE USA…..as….FAST AS HE DRAWS A BREATH…..what a dummy-crap..!!!!!!!!
So……Biden …..DOESN’T think Israel is AN IMPORTANT Ally…..Jen ..CIRCLE AROUND girl says it’s SO…or just OMITTED IT..!!!!!!
I work for ironed it I deserve it
They just need to leave my money alone
How does this change the benefit during "the retirement years"?only indirectly. I don't agree with this at all. Don't get me wrong – higher income individuals pay a disproportionately higher tax than lower income. But there is no realistic way around this. Another issue the speaker ignores is that generally individuals pay a lesser tax rate in their retirement years. I am 67 years old and because of favorable RMD rules I pay little or no tax now-while I got a significant deduction for my 401k as a partner in a cpa firm. Another benefit the speaker ignores is the deferral of tax on earnings which is much greater on higher balances(obviously). So, this is not a big deal. 401k, simple IRA's IRA's are still a real good deal.
What you should worry about is if the dem's decide to invade these retirement account by either direct taxes or forced federal investments. Americans have a significant amount of funds in these accounts-and we are generating deficits like it was a good thing. Have a nice one everyone.
this is terrible….
These people deserve everything they get from this asshole. They voted for him
It’s a crime in Amerika to work hard, be successful and save for the future so you won’t be dependent on government.
I think it only affects fat rich Republicans
Biden’s proposal will increase the benefits for almost all taxpayers but will reduce benefits for a small number of affluent taxpayers, those with taxable incomes over 178,000 or so for married couples, or half that for single tax payers. Are you a millionaire pundit on Fox News? Then you will get reduced retirement plan benefits. But are you a regular person? Then Biden’s proposal will increase the benefits of your 401k or IRA account. Biden proposes a 20% credit instead of a deduction. Is your marginal fed income tax rate higher than 20%? You lose. Lower than 20%? You win. The marginal tax rate is the rate you pay on an additional dollar of income.
There's talk about unrealized gains being taxed in the near future
So what about the distribution side? Are they going to be taxed at the same fixed rate that the tax credit was set to? Was it 22%?
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The DNC doesn't have to worry about winning elections anymore since they are stuffing the ballot boxes! Welcome to the United Communist States of America!
However, you do not have to participate in the 401K and just invest your own money in your own mutual funds. Never, ever, trust your state or federal governments!
My democratic friends always say "Just because he said it, doesn't mean what you think it does!" "He doesn't really mean that!"
Just checked the tax brackets. So basically as long as I make under $326,601/year I am better off with this new tax credit than the deduction. I think I'm ok with this.
You voted for him American.
Go Roth!
I agree. We should evenly divide the tax burden to everyone. Not based on how much I make but completely equal amounts.
Don’t forget to mention the pro rata rule when promoting owning both traditional and Roth IRAs. All combined iras will be viewed as one big pot to the government so you’ll never be able to take Roth money out tax free if you have tax deferred contributions in a traditional. Cream in the coffee can’t ever be desperate again. They will make you do a percentage of each for tax purposes.
rich people don't have 401K, it a tax on the middle class
Fucking democrats
So what about retired with money in 401k? Will Biden be able to increase the tax when we withdraw?
https://taxfoundation.org/bidens-proposal-would-shift-the-distribution-of-retirement-tax-benefits/
Side note: For Biden to keep his campaign promise of not raising tax on those making $400,000/year (35% federal tax bracket), this retirement credit needs to be at least 53.85%. It is calculated as follows: 1/(1 – 35%) = 53.85%. In fact, it needs to be higher if you include state tax into the mix. It complicates state and local 401(a) defined contribution plan because those plans cannot change the contribution rate once it is set–a person whom budgeted 10% of their paycheck is stuck with it even with the tax deduction disappearing thus their take home pay will go down without their control. If you want to write Biden about this, please contact:
https://go.joebiden.com/page/s/contact-us
Just don't use 401k. Buy a rental property… Use HSA instead.
Pronounce Kamala's name right. You sound stupid.