Revising Retirement

Issue 05-15-17   |   Reviewer:   Larry Walther, Ph.D., CPA, CMA
Disciplines:


Abstract

Beginning in the early 1980s, the tax code opened the door to various individual tax-deferral tools, largely known as individual retirement accounts (IRAs). Similar corporate programs are offered by many companies. These are typically called 401(k) plans.

The essence of these programs is that current salary can be set aside tax-free, along with not paying taxes on interest, dividends, and gains. Those who have been active participants often have several million dollars set aside in such programs.

Some argue that this is excessive and costs the government billions annually. Tax reform discussion has hinted at curtailment of the amount available for deferral, but has met with stiff resistance. Meanwhile, the bigger question is why the participation rate is not uniformly high. Apparently, many people don't opt to participate in this tax-planning "gift."





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