New Congress could mean good news for your retirement plans
The arrival of a newly configured Congress next year all but ensures that any plan to change Social Security to provide personal investment accounts has been abandoned.
And, with more and more companies opting out of defined benefit or traditional pension plans, the onus for retirement planning falls squarely on the shoulders of workers.
But the new Congress will have the opportunity to provide workers with a number of tax-advantaged programs that will encourage them to pump up their savings and investing efforts.
When the new Congress goes to work in January, it will be presented with a number of proposals to boost savings.
Whether or not its members have the moxie to act could determine the path to retirement security for many households.
For instance, not all workers have the opportunity to contribute to an employer-sponsored retirement plan.
So, legislation has been proposed to allow workers to have payroll deductions steered directly into individual retirement accounts.
The sponsor of the legislation says it will be of prime benefit to women and small-business owners.
If people have money deducted from their paychecks, it will be easier to begin the process of building a nest egg.
After all, once you cash your check, there is less likelihood that you will make the effort to fund a retirement account.
Another perennial proposal is to allow investors to defer taxes on dividends and capital gains that are reinvested in mutual funds.
Again, give people a tax incentive to save, and they will take it.
How about incentives to save for your child’s education?
We’ve already heard that Congress will address the higher costs of higher education.
One proposal is to create something called a 401 Kids Family Savings Account.
Money set aside at the birth of a child would be allowed to grow tax-free and could be used for qualified expenses such as financing college, buying a home or saving for retirement.
The idea behind all of these proposals is simple: Give Americans an incentive to save, and they will.
We learned that in the 1980s, when Congress put restrictions on who can make tax-deductible contributions to IRAs.
It didn’t take very long for folks to figure out that these accounts didn’t make much sense if they were no longer tax-friendly.
After all, why put your money in a vehicle with high fees and penalties if you need to withdraw before reaching the arbitrary age of retirement?
That really was the incentive for people to switch over to employer-sponsored plans such as 401(k)s, which offer tax incentives.
It is becoming increasingly clear that the ball is in your court when it comes to funding retirement.
| Change in Congress could mean savings boosters North County Times,?CA?- And, with more and more companies opting out of defined benefit or traditional pension plans, the onus for retirement planning falls squarely on the shoulders … |
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