Sarumpun.com – While only about 13% of U.S. employees across the country to enjoy the Pension Fund ensures a stable, income for life, all 535 members of Congress do… thanks to Uncle Sam.
Members of Congress participate in the system of retired Federal employees that provides a pension fund where American workers could only dream of.
Retired private often pay management fees that can exceed 1% every year on the choice a poor investment. Members of Congress pay maximum 0.039 to% to fund guaranteed fit with the market.
A proposal floating around Republican circles in Washington will be added insult to injury: they want to end the tax-cuts to Your retirement fund so that they can give $1.5 billion in tax breaks for U.S. companies.
Give and take
Congress is reportedly considering reducing the benefits of his contributions to the 401 (k) and retirement Plan similar.
It’s because he wants to reform corporate taxes, cutting the rate from 35% to 15%. That the explosion of a meteor hole size in the federal budget.
Cue police pension.
According to the latest report of the Committee of the Joint on Taxation, the exclusion of contributions and earnings contribution plans are specified will cost the federal government more than $584 billion over the next five years.
The new Proposal would treat all 401 (k) and the contribution to the traditional IRA as if their contribution to Roth IRA. You will lose the tax exemption of such contributions, but the future of 401 (k)/ira and appreciation will be tax-free. Some people think it could raise $1.5 trillion in additional tax revenue over the next decade, making the corporate tax and worthy.
Unless they decide to tax retirement income and appreciation as well.
The end of the Roth?
Now, each of the revenue and profits of Your 401 (k) and/or traditional produce not get taxed until You make a withdrawal.
But a new proposal would impose a 15% tax on the annual profits, raising $1.5 trillion over the next decade. It will be worse than the taxable account investment choice, however, in which a person can defer capital gains tax only do not sell a stock.
“This is not a question of whether the retirement plan will be to get the haircut, but of how much,” said Bradford Campbell, former assistant secretary of labor for employee benefits under President George W. Bush. Replace the revenue lost from tax cuts, he said, “a game of winners and losers, and the pension system is ready to be one of the losers.”
My sources in Washington say that team Trump is definitely planning to push tax reform as President Ronald Reagan in 1986, as well as the gap of cost-cutting. This will not only cut taxes, as has been rumored.
Such an exception to the pension fund, the proposal was also repaid with income tax local. If you live in a place like New York or California, it was indeed a big problem.
There is no issue that is contested in the U.S. political in Addition to the reform of the federal tax. So who might win and lose if the tax reform following the proposal of President Donald Trump?
First, the government cannot rely on the unconditional support from the base of the voters who put Trump in the White house.
Although voters income is low it may be out neutral because they tend to not have a 401 (k) plan, IRA, household earned $ 50,000 or more-is-more who voted for the president-will take a serious hit if the pension is subject to pay upfront.
The family of a high-income probably will not care one way or another because they tend to push the boundaries of pension contributions they are quite fast anyway.
Second, the company of the proposal full. Although Trump plans to cut the corporate level from 35% to 15%, many U.S. companies already pay less than 15% thanks to the gap-especially in the energy, industrial equipment and heavy.
They may be opposed to the plan because it closes the gap. It makes the piece is uncertain.
How to prepare
Uncertainty about something we have come to accept tax – retirement Plan benefit-means You need to look at Alternatives as a matter of urgency.
One to explore the benefits of investing in the stock market directly. The old strategy of buy-and-hold may be the more interesting of the pension fund, depending on how capital gains are treated under the tax reform plan.
Another alternative is to consider the advantages of life insurance.
Some kind of a policy of life is much more better than the vehicles of retired folk. That’s because the IRS currently treats the” distribution ” of the policy as a loan that is unruly against the policy, who retired when paying Your passing.
Life insurance trust, on the other hand, may be a more attractive vehicle to give money to Your heirs if the relative return to the account of the IRS kindly take a dip nosed.
Whatever happens, I will keep an eye on developments… and offers a solution.
Ted Bauman joined by Investors sovereign every day of the year 2013. As expats living in South Africa during the 25-year-old Ted specializing in asset protection and international migration. Read more what did he say about living off the coast here.