Your Retirement Just Dodged a Bullet: GOP Backs Off 401(k) Limits
Retirement savers with 401(k) accounts can relax — at least for now.
The Republican-backed tax reform legislation released Thursday did not propose any cuts to contribution limits to 401(k) retirement plans — a move lawmakers were reportedly considering to help balance the tax cuts planned for high-income earners and businesses.
According to the language in the tax reform proposal, it appears 401(k) tax-free contribution limits will stay at $18,000. For savers ages 50 and over, that limit is still $24,000. (It's worth noting the contribution limit will increase by $500 next year for savers under the age of 50, the IRS announced in October.)
Reports of Republicans considering axing the 401(k) contribution limit by thousands stoked fear in savers who, through their 401(k)s, contribute tax-free money to save up for retirement.. The potential cut to limits was criticized by Democrats — and was denied by President Donald Trump before the tax reform legislation was released.
"There will be NO change to your 401(k)," Trump tweeted in late October. "This has always been a great and popular middle class tax break that works, and it stays!"
The bill's lack of changes to contribution limits to retirement plans pleased the Investment Company Institute, an association of U.S. investment companies, and the American Benefits Council, a trade organization that advocates for employer-sponsored benefits. Several politicians and retirement savers took to Twitter to share their relief after the legislation came out Thursday.
Outside of retirement, the proposed legislation — known as the Tax Cuts and Jobs Act — lowers the corporate tax rate by 20% and reduces the number of tax brackets from seven to five, among other measures.