The Savers Get Punished Again

I've always expected the Government to come for our retirement funds.  There is a lot of money tied up in tax-sheltered accounts that every member of Congress could find multiple ways to spend.  I just always assumed that Democrats that would take steps to take it away--not Republicans.

There would always be a Bernie Sanders-like liberal that would see no need for Americans to put away money for their retirement--because "the Government will always be there to take care of you".  All we would need to do is trust Washington to actually hang on to that money until retirement time.  But looking at how Social Security and Medicare are trending--all of that would be gone long before those of us in Generation X would need it.

But it surprises me that it is Republicans that are taking the first steps to take away the incentive to save for retirement.  The GOP tax plan being touted by everyone includes a provision that would reduce the non-taxable amount that can go into regular Individual Retirement Accounts or employer-provided 401k accounts from $18-thousand to just about $2400.  While I would like to think that this change will drive more people to contribute to tax-free growth accounts like Roth IRAs, it will more than likely push folks to just spend the extra money promised by the tax reform measure right away.

The greatest fear is that Congress will eventually change the Tax Code to do away with the tax-free distributions from Roth IRAs and Roth 401k accounts.  My wife and I are taking advantage of that benefit the most--maxing out our Roth contributions with post-tax dollars now, to reap the benefits in our golden years.  But as more Americans do that, Washington would see a lot of dollars flowing to retirees that they can't touch.  And based on an inability to control Government spending, they are going to need that cash even more in the future than they do now.

Plus, to keep the Code consistent, the maximum Roth contribution would likely be reduced to match the standard IRA limit as well--even though we are depositing post-tax dollars, and Government has already been given their share.  If that happens, you have to wonder how or why anyone will see the benefit of saving for the future.  And in doing so, Republicans will be playing right into the hands of the Democrats that preach Government dependency.