Eliminate Retirement Plan Tax: An uncontroversial new proposal that would compromise current retirement plan tax regulations could help save Social Security.
Andrew Biggs, an economist, and Alicia Munnell, a nominee for the Social Security Board, have put forth a proposal that may provide additional financial resources to the Social Security Administration. It is widely anticipated that this agency will reach insolvency by 2033.
Leftist Munnell and conservative Biggs have published a new research proposal on Social Security.
Biggs and Munnell advocate for a restriction on tax preferences for retirement savings programs to save the faltering Social Security program.
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In an interview with Newsweek, Mangaliman said that limiting tax preferences for retirement savings would discourage individuals from saving. “Additionally, it may disproportionately impact higher-income earners who rely more heavily on tax-advantaged retirement accounts.”
As a result, some citizens might opt out entirely, says Zack Hellman, owner of Tax Prep Tech.
“The pros might include a more immediate solution to the funding shortfall facing Social Security, potentially securing its future for retirees,” Hellman reported to Newsweek. “The cons could involve less incentive for individuals to save independently for retirement, possibly leading to lower overall savings rates.”
Enhancing confidence in the Social Security system might deter present savers from further accumulating funds for retirement.
Mangaliman said the plan may help Social Security recipients, but at the same time hurt future retirement savings. It may further dissuade current workers from saving for retirement, causing a future retirement crisis.
Alternative proposals have been put forth regarding the troubled Social Security program. Some individuals advocate for an audit and reallocation of funds from inefficient programs or an increase in the retirement age. An alternative suggestion is to increase Social Security taxes using a wage-means formula.
Many of Thompson’s clients, who are certified financial planners, only contribute to their 401(k) plans, which has a profound impact on their retirement.
Thompson told Newsweek, “Reducing tax preferences for retirement savings only harms those at the bottom.” “This is the only savings account that the majority of individuals possess.” It is disappointing to hear that the behavior of individuals has not changed.”
The cessation of employer-matched employee contributions could potentially result in the demise of retirement plans of this nature.
Thompson wondered if companies would continue to match employee contributions without tax deductions. “That would change the entire landscape because I believe people will no longer place money into the plan.”
