Congress Is Overstating The Immediate Tax Benefits Of 401(k)s, Actuaries Say

Wednesday, June 01, 2011 06:16
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Congress Is Overstating The Immediate Tax Benefits Of 401(k)s, Actuaries Say

Tags: 401(k) | Congress

In a rare twist on efforts to get retail investors to realize the advantages of tax-deferred savings accounts, actuaries now say the government is overstating those very same benefits.

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Attempts to blame 401(k)s and other retirement vehicles for a big federal revenue shortfall are grossly exaggerated, according to the American Society of Pension Professionals & Actuaries.

 

The ASPPA did the math and found that if you account for these vehicles as a tax deferral -- which they are -- and not an outright tax break, they only cost 25% to 45% as much as the budget hawks in Congress currently think.

 

The problem is that Congress is so consumed with looking at the next 10 years that it is forgetting that sooner or later these accounts will be used for retirement income, and then Washington will be able to tax the non-Roth proceeds.

 

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