I too have no issues with future contributions being Roth-like (pre-tax, no tax on distributions). But forced conversion is just so wrong on so many counts.
I think that the idea of taking money from people who have been responsibly saving is abhorrent and will not be palatable to politicians who probably have been saving as well.
Yes, especially if this is RETIREMENT savings. Tax the heck out of any 401(k) leftovers that go to my heirs… but let me enjoy my savings.
I basically ignore all talk of tax cuts, flat tax, etc. Why? Because spending is the important issue. If a politician talks about freezing spending at current levels for 5-10 years, I’ll listen.
We have to pay for that all-important wall. 
Agree. But… Please let’s not turn this into a political battle. 
Back to 401(k)s and such.
I figure that all we can do is prepare as best we can by saving and following the tax laws as they currently exist. We try to ignore the noise and live below our income. So far so good.
I personally think Roths are a terrible idea and should be abolished, and I could even be convinced that existing Roths should all be converted into non-deductible IRAs. Sacrificing future revenue for current revenue is never a smart idea, and the estate aspect of it is just wrong IMO.
The idea of taxing earnings inside the 401k is interesting, but how would this work in practice? How far back will they look, or is this just going forward? When I finally take a distribution, part of it will have been taxed already, how is this going to be accounted for? I honestly have no idea how much of my retirement accounts are from contributions and how much are from earnings. I suppose I could look back through 20 years of tax returns and figure it out. I think I still have them all.
So, they’d make new contributions 401ks taxable? It would be painful to try to make the change retroactively – it is also really bad form as no one would trust the government. As a result, they typically only make tax changes prospectively. Assuming that, do new 401k contributions get treated like Roths? At this point in my saving career, I’d love to be eligible for Roth contributions though I wouldn’t be happy with a forced conversion as I am very close to the cap on my Defined Benefit Plan and am rolling it into a 401k.
The Roths and 401ks were really about encouraging people to save for retirement rather than spend. A consumption tax would do that more directly.
I hope the Fidelities, Vanguards, and the like will lobby hard against any 401(k) tax grab.
I can’t imagine they would do anything retroactive. What they could do that would be more fair, as well as limit the amount of the total deductions taken, is to set the contribution limits so that they are the same for 401Ks, SEP IRAs, Simple IRA, etc. Employees and the self employed should not be able to use multiple plans in the same year. And the employer contribution should not be treated differently. For example, the 401K participant contribution limit is $18,000. But there is no employer limit other than a maximum employee and employer contribution cannot exceed $53,000. So if I make $100K and my employer does a 50% match on the first 10% my total contribution is $18K + $5K. But the VP might make $400K and he/she would be able to put in $18K + $20K. For most corporate employees it is very skewed towards giving a bigger tax break to higher earners because they can put more in tax deferred. We’ve been in a situation where we worked for a small company without a 401K, and then your maximum is simply the regular $5,500 IRA and you can take your choice between Traditional and Roth. They should be able to make the whole retirement savings system more simple, and more fair.
Sometimes not. DW’s employer does not match, at all, 401k for highly comped individuals.
ETA: I agree with your main point though.
I have never seen a 401(k) plan that would allow bigger %-wise matching for highly compensated employees; usually, it is the opposite - over a certain amount, and the match % drops to 0.
I would have thought the same as BB, but I did not know if employer matches were also subject to that balancing test.
Yes, I never understood why people who can only contribute to an IRA are limited to $5500 or $6500 with the catch-up.
And I don’t understand why people who are self-employed are restricted to putting less (on a percentage basis) into their SEP-IRA than an employee of a self-employed person.
My employer does not match our 401k’s, unfortunately.
Has anyone seen anything about abolishing AMT? That would make me very happy.
I’d like to be able to throw some of my piddling income into a retirement vehicle. Employer doesn’t sponsor a plan; if they did, I’d throw 100% into it. Because DH has retirement plans, I’m left with only a non-deductible IRA option.
If an employee has maxed out tax-deferral contribution in an IRA. she may still be able to make after-tax contributions, which IIRC, are not subject to non-discrim testing. Total defined contrib (401k) amount = $18k before-tax deferrals + employer match + any employer profit sharing + after-tax employee contribs = $53k. Catch-up contributions for those over 5o (another $6k this year) DO NOT count towards the 415© limit of $53k.
^ i think the 2017 max is $54k. Sadly, not available to us.
Roths are a rather short sighted invention, hey, we need tax $ now, so pay tax on that Roth contribution and then you never get taxes on that income. So, if congress had always budgeted based on all the taxes being paid when trad IRA & 401k money came out, what happens when all the Roth $ are not taxes. You think, well, hey $5500-$6500 for most people, not such a big deal, but there are all the Roth conversions.
It’s just leaving the problem in the future congress’ hands. Makes me concerned about how they might mess with things in the future, and I do hope that anything is future only, no retroactive actions!
And I agree with the above, why not let everyone put lots and lots of money into retirement vehicles of their choice, do both a Trad & a Roth, let self employed put lots into a SEP, no limits on contributions at least to vehicles which require an RMD. I mean, why not? Why not encourage everyone to have the most solid retirement savings they can, so they spend lots and are taxed lots later?
Something is going to be quite ugly in the next few decades when all of the people in our generation who don’t have defined benefit pensions retired. Sure the CC crowd and the Boglehead crowd are forward thinking, but across the general population, not so much & it’s not gonna be pretty when so many people are on SS for their only income.
Yes, I re-read Woodsmom’s post, and I have never seen such a 401k plan, and doubt that it would be legal. Every plan I’ve ever seen computes the match against the contributed dollar amount, nothing to do with percentages of income directly.
I forgot about discrimination tests and admit I’m not an expert and I have no idea how you might get to 53K or 54K. I do know it isn’t an available option for us personally… But I think my main point is that it should be the same amount for the limit regardless of the exact retirement plan, or lack of one.
And I was using the same match percentage, but with a higher salary you also get a bigger company contribution and total amount in your 401K.