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23k is a lot to put in per year. How many people do you think can even afford that? Let alone more
I sure fucking can't. Especially with $10,000 in medical bills after Aetna decided to stop insuring in my county.
Strange that we aren't asking why it's so hard for people to put in the maximum. Seems like that's the better question. What measures could we put in place that make it easier for poverty wages to better set them selves up for retirement?
If you're earning poverty wages there's not a lot you can do. They're called poverty wages for a reason. Considering you can't really bring spending down at this income level, the only path is to increase income somehow.
You pay before taxes on traditional contributions so the net income hit is less.
Say your effective tax rate is 30%, then you are eating in gross pay only 18,900 off income to fund 27000 in 401K savings.
The whole point of tax deferred accounts really.
Roth contributions don’t work this way, but most do not max out funds using Roth given the tax difference in retirement vs working.
I want your job if you can put almost 19k a year in your 401k. I couldn't even get close to that number.
I'm sorry to hear about your medical condition. That's a rough hand to have been delt. I'm happy for you that you're planning ahead and I hope it goes as well as it can for you. My 401k is pretty on par for my age (in terms of a multiple of my annual income based on goggle research). I've been putting as much as I can in but no where even close to the limit. What's pretty sad is most of my co-workers are only putting 5% maybe 10% away and they think that'll be enough. I try to explain but the vast majority don't care.
While I totally agree with this, you need to be making quite a bit in order to have an effective tax rate of 30%. I make six figures and don't even pay that much.
For reference, someone full-time at Federal minimum wage (which is unlikely: most minimum wage jobs are fewer hours) makes $15,080.
The amount was already too high to begin with. You add in IRA's and 401k catch-up and it gets even worse.
It's mostly a benefit to upper-middlenclass people. The executive officers, presidents, VP's, and upper-level managers making $200,000-$500,000/year in employment income. An extra $500/year of deductible income probably doesn't move the needle much either way.
My guess is that it's not a huge loss of tax revenue, it's not a significant increase to their retirement savings, not a huge increase in money being invested into the economy. $500 is only 2% of $22,500. Given inflation, it's hard to imagine this increasing by anything less than that. All in all, the change seems reasonable to me, and at least moving in the right direction if not getting there immediately in 2024.
Per the article: