02.18.20
What ‘Rothifying’ 401(k)s Would Mean for Retirees
by: Olivia S. Mitchell; Raimond Maurer
Efforts to repeal the current structure of pretax contributions to retirement accounts in favor of a system where contributions would come only from after-tax income—called "Rothification"—could be given new life by the government’s current enormous need for revenue to plug budget gaps and rein in the nation’s debt. Currently, most US savers contribute to retirement accounts with money that is deducted from their taxable income, and pay taxes on those accounts only when the money is paid out in retirement. The assets in defined-contribution plans and individual retirement accounts hit $18.3 trillion as of the third quarter of 2019, according to the Investment Company Institute. The authors warn that switching to a system where contributions to retirement accounts are made only with after-tax money would boost tax revenue in the near term, but not as much as it would reduce it in the longer term, and would also leave retirees worse off.
Read the full article on Wall Street Journal