Senate considering eliminating pretax 401k catch-up contribution

[StockSurfer]

Workers over age 50 would no longer be able to make catch-up contributions on a pretax basis to their retirement plans under a new amendment to the GOP's Senate version of the tax bill.
https://www.cnbc.com/2017/11/13/sen...T=UICTFontTextStyleTallBody] [/FONT][/COLOR]

 

[StockSurfer]

Workers over age 50 would no longer be able to make catch-up contributions on a pretax basis to their retirement plans under a new amendment to the GOP's Senate version of the tax bill.
https://www.cnbc.com/2017/11/13/sen...o raise revenue in the 10-year budget window.

 

[alevin]

Definitely a tax increase on those trying to max out both catchup and Roth, just when they can at last try to make up for all the years they couldn't save enough and yet it's still a challenge. hmm. something wrong with that picture.

 

[quabit]

Definitely a tax increase on those trying to max out both catchup and Roth, just when they can at last try to make up for all the years they couldn't save enough and yet it's still a challenge. hmm. something wrong with that picture.

Maybe this will keep workers in the work force longer instead of retiring in their early to mid 60s. I'm not trying to be political but this is one way to ensure Social Security etc remains and they don't have to reap the backlash of changing the age you can start collecting or contribution percentage. Plus it gives them the ability to kick debt down the road further since workers will be working longer. Its a win for them and a loss for us.

 

[evilanne]

Workers over age 50 would no longer be able to make catch-up contributions on a pretax basis to their retirement plans under a new amendment to the GOP's Senate version of the tax bill.
https://www.cnbc.com/2017/11/13/senate-tax-tweak-would-curb-pretax-401k-catch-up-.html

Cactus posted this link https://www.fedsmith.com/2017/11/13/proposed-amendment-eliminate-current-tsp-catch-contributions/ --would require Roth for Catch Up but looks like amount would increase $9K per Hatch amendment. Eliminating conversions would throw a wrench in my plans but as article states: "Both the House and Senate have introduced their own tax reform bills, and more changes are likely to take place to both as they work their way through the legislative process."

 

[StockSurfer]

Cactus posted this link https://www.fedsmith.com/2017/11/13/proposed-amendment-eliminate-current-tsp-catch-contributions/ --would require Roth for Catch Up but looks like amount would increase $9K per Hatch amendment. Eliminating conversions would throw a wrench in my plans but as article states: "Both the House and Senate have introduced their own tax reform bills, and more changes are likely to take place to both as they work their way through the legislative process."

Messes up my retirement strategy as well... Instead of making maximum contributions during my preretirement years, having it grow in the market, and then withdrawing after retirement when my income is lower and I’m in a lower tax bracket, would have to pay maximum taxes on it now when i’m at the higher tax bracket. I contacted my reps about this proposal, it would take away an important mechanism to save for retirement ...

 

[evilanne]

Original ink fixed (hopefully) https://www.cnbc.com/2017/11/13/senate-tax-tweak-would-curb-pretax-401k-catch-up-contributions.html

 

[alevin]

Another little tidbit from that same link that I missed previously. Be careful about when/if you do a roth conversion from trad ira to Roth in your outside accounts. the senate bill would disallow recharacterization, ie ability to change your mind and undo the conversion, put those funds back into trad ira. there was always a time limit on changing your mind, but now would not be allowed at all if this stays as part of the final legislation.

 

[James48843]

Hatch Amendment #2 to Chairman’s mark of “Tax Cuts and Jobs Act.”
Short Title: An amendment to the catch up contribution rules for section 401(k), 403(b) and 457)(b) retirement savings plans.
Description of Amendment: This amendment would require all catch up contributions to section 401(k), 403(b) and 457(b) retirement savings plans to be Roth only, and increase the $6,000 catch up contribution annual limit applicable to such plans to $9,000.
Offset: This amendment is expected to raise revenue in the 10-year budget window.

Sucks!

When this is done, my taxes go up. How about you?


Sent from my iPhone using TSP Talk Forums

 

[RazorCat]

So, Roth only on catch-up contributions only. And the ceiling is increased. I would love a choice if it were me, but not the end of the world. It’s still your post tax money, and it’s earning compound interest.
This tax plan isn’t the first to use creative accounting to reach the target. Both sides have been guilty of that.
Weve got bigger problems in this country.

 

[Scout333]

So, Roth only on catch-up contributions only. And the ceiling is increased. I would love a choice if it were me, but not the end of the world. It’s still your post tax money, and it’s earning compound interest.
This tax plan isn’t the first to use creative accounting to reach the target. Both sides have been guilty of that.
Weve got bigger problems in this country.

Would love to know how many TSP'rs are currently utilizing the catch-up contribution provision?

 

[RazorCat]

Would love to know how many TSP'rs are currently utilizing the catch-up contribution provision?

I attended a number of retirement seminars when I was employed. The number of employees that acknowledged they were contributing the maximum to TSP, and making catch-up contributions was minimal. I would think most employees struggle just to max out TSP contributions. They’re aren’t any statistics (that I found) on the percentage of Feds that make catch-up contributions.

 

[alevin]

The only way I've been able to do it was to pay off my mortgage faster by adding extra principal every month for several years. . And having put down $20% in the first place, for 30yr mort. and buying a house that kept me at reasonable mortgage payments when interest rates were 6%+.

The $ that would have still been going to interest payments is what is going into catchups since the mortgage got paid off. but even then it took a couple years to do max catchup, and cut some impulse spending back as well. and buy a used vehicle I could buy cash or pay off in a year on a 3-year loan on half the purchase value and get that paid off first before paying down principal on the mortgage. Dave Ramsey concepts.

 

[weatherweenie]

Count me as 1.

Would love to know how many TSP'rs are currently utilizing the catch-up contribution provision?

 

[weatherweenie]

It has since been dropped:
https://www.fedsmith.com/2017/11/16/hatch-drops-catch-contributions-amendment-senate-tax-bill/

Workers over age 50 would no longer be able to make catch-up contributions on a pretax basis to their retirement plans under a new amendment to the GOP's Senate version of the tax bill.
https://www.cnbc.com/2017/11/13/sen...ntTextStyleTallBody] [/FONT][/COLOR][/QUOTE]

 

[kam]

Sucks!

When this is done, my taxes go up. How about you?


Sent from my iPhone using TSP Talk Forums

I'm already retired and I've run through a couple of 1040's under this new plan and my taxes will go up. I live in a state where SALT matters and having had cancer, medical deductions were also pertinent in those years. I've always itemized and that $12k cap, is a pittance. Also, no more personal exemptions. I am concerned as I retired earlier than planned due to cancer and things were not going swimmingly to begin with. Just more salt in the wound, I guess. I'm sure the 2.2% COLA raise this year won't even cover the lack of previous year COLAs despite health insurance premiums going up in every one of those years. If they mess with Medicare, it can only exacerbate things.

My advice, don't retire. Given our current scenario, you can plan all you want, but the lawmakers can pull the rug out from under any of those plans.

 

[Scout333]

A reasonable compromise on the SALT deduction could be to allow any state and local income tax and/or property taxes up to the House Plan cap of $ 10,000 not just property taxes. Not perfect but better.
Call your Senators and/or Congressman.

 

[evilanne]

I'm already retired and I've run through a couple of 1040's under this new plan and my taxes will go up. I live in a state where SALT matters and having had cancer, medical deductions were also pertinent in those years. I've always itemized and that $12k cap, is a pittance. Also, no more personal exemptions. I am concerned as I retired earlier than planned due to cancer and things were not going swimmingly to begin with. Just more salt in the wound, I guess. I'm sure the 2.2% COLA raise this year won't even cover the lack of previous year COLAs despite health insurance premiums going up in every one of those years. If they mess with Medicare, it can only exacerbate things.

My advice, don't retire. Given our current scenario, you can plan all you want, but the lawmakers can pull the rug out from under any of those plans.

Sorry to hear that you had to retire early due to medical issues. I hope you made it through treatment and are doing well.