Your future is at risk—the future of your 401k that is.
According to Brian Graff, the Executive Director and CEO of the American Society of Pension Professionals and Actuaries (ASPPA), the tax benefits enjoyed by over 60 million Americans covered by a 401K or similar plan could be affected in the tax debate in Washington.
It has been over 25 years since Congress last reformed retirement taxes and Graff is concerned any new rules will disadvantage retirees. “The last time they did [retirement] tax reform they cut the 401k limit by 70%. And given how much the current budget deficit and the accumulative debt that this country has, it is a major driver for pretty much everything to be accountable,” explained Graff. “…We need to make sure that they [Congress] don’t rob Peter to pay Paul and break the retirement piggy bank of American workers.”
Graff believes this particular issue is tragic because tax revenue lost from retirement deferrals is best described as illusory, because it is only a deferral. “It’s a fiction because we’re not a deduction, we’re a deferral. When the money comes out of the plan it’s going to pay the government back. But because they need that cash back [during the] ten year budget window, you don’t get credit for the fact that it’s a deferral as opposed to a pure deduction like mortgage interest or charitable deduction,” Graff explains. “So, in reality they aren’t going to raise as much money as they think and they are going to be deducting the amount of money that they raise in later years when people would have been taking that money out for retirement.” Simply put: we are borrowing tax revenues from the future to lower today’s deficits.
While some may think this is a problem solely for the wealthy, Graff insists this is not the case. Of these 60 million Americans covered by a 401(k) or similar plan, 80% come from households making less than $100,000 in income. Graff explains wealthy investors will be able to retire in any eventuality, however it’s the working class American’s potential for retirement that will be most affected.
He explains there are a number of proposals being brought up that are cause for concern, such as cutting annual contribution limits. The most recent proposal considers placing an annual lifetime cap of the amount 401k participants are permitted to have in their retirement account. “What does that mean for successful investors? And particularly, what does that mean for decision makers? If you’re a decision maker of the company and you are told you can’t save anymore what kind of impact does that have on your willingness to borrow out offer benefits to the rest of your workers?” said Graff.
In order to raise awareness, ASPPA started the campaign, Save My Piggy, this past November. This consumer-driven campaign features a variety of tools whose main goal is to convince 250,000 consumers to email congress stating, “Stay away from my 401K.” The campaign tools include:
• An active social media campaign through Facebook, Twitter and Google+
• An online member kit outlining how members can get involved in the campaign.
o A variety of content designed to go viral such as:An automated way to send an email to your Member of Congress.
o A humorous and animated video on what Congress is contemplating and why everyone needs to get involved and send them a message.
o A Video Game “Protect My Piggy!”
o Great information in an infographic-style layout that shows why saving for 401k through employers is successful and essential in helping working class Americans save for retirement.
Already the campaign has begun to have an impact: helping direct any questions that arose among Congress members and staff to ASPPA—providing ASPPA and the Save My Piggy campaign the opportunity to stress the importance of these incentives. To date, over 70,000 emails have been sent of the 250,000 goal and the campaign has been featured on high-ranking media outlets such as CNBC and CNN.
However, this still isn’t enough. “We need to continue to beat the drum because the process of tax reform is ongoing,” stated Graff.
For more information on ASPPA’s
Stay Away from my 401k campaign visit: