Tags: Hanson | budget | IRA | 401k

Financial Planner Hanson: Obama Budget Would Kill Small Companies' 401(k)s

By    |   Thursday, 20 March 2014 12:44 PM

President Obama's 2015 budget proposal would do grave damage to 401(k) plans at small companies, says Scott Hanson, a certified financial planner at Hanson McClain Advisors in Sacramento, Calif.

"If you work for a Fortune 500 company, odds are you have a decent 401(k) plan and Obama's budget won't have much impact on you," he writes in an article for CNBC.

"However, if you are like the millions of Americans who work for a small company, this budget may kill your chance for any sort of financial independence during retirement."

Editor’s Note:
Retire 10 Years Earlier With These 4 Stocks

Currently, all contributions to 401(k)s from every employee are fully tax deductible, Hanson explains. But under the Obama budget, the deduction would be capped at 28 percent for high-income earners.

Workers in the tax brackets higher than 28 percent would thus be penalized, Hanson notes. But they would still have to pay full taxes when they withdraw the money in the future. "This, of course, is double taxation," he writes.

"Given that most of the high-income taxpayers are business owners, are they really going to want to start a retirement plan that has the very real potential to be both professionally and personally bad for them?" Hanson asks.

"The president's budget proposal, while attempting to restrict the wealthy from saving more for retirement, will actually create additional hardships for the working class," he argues.

"The wealthy will figure out ways to have a secure retirement, regardless, but the average worker will surely be hurt if this budget does indeed become law. "

While many American workers think of 401(k) plans as their primary vehicle for retirement savings, Bankrate.com lists five ways in which individual retirement accounts (IRAs) are superior to 401(k)s.

1. "Bigger and Better Selection of Mutual Funds."

2. "Lower Expense Ratios and Other Costs."

3. "Option to Invest in ETFs and Individual Stocks."

4. "Easier Access to Roth Advantages."

5. "More Options for Withdrawing Money Penalty-Free."

Editor’s Note: Retire 10 Years Earlier With These 4 Stocks

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President Obama's 2015 budget proposal would do grave damage to 401(k) plans at small companies, says Scott Hanson, a certified financial planner at Hanson McClain Advisors in Sacramento, Calif.
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Thursday, 20 March 2014 12:44 PM
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