Jericho, NY (MMD Newswire) -- The government's possible solution to avoid the fiscal cliff could result in a decrease 401k contributions by as much as 64% for middle class Americans, making it harder to save for retirement.
As Congress tries to come up with a plan to avoid the fiscal cliff, a compromise between the Republicans and Democrats will consider eliminating deductions and imposing tax hikes on families making more than $250,000 per year. At the heart of the compromise is a proposal to reduce 401k contributions by as much as 64%.
"The last time Congress slashed 401k contributions was in 1986. 401k contributions were cut by 70% and many 401ks were terminated," says Brett Goldstein is Director of Retirement Planning at American Investment Planners, LLC based in Jericho, New York. "Congress should be encouraging Americans to save money for retirement not making it more difficult for them."
The reduction in 401k contributions would cause a particularly big reduction in retirement contributions for low-income workers. "Employees earning 30,000 or less rely almost exclusively on company matching and Social Security for their retirement," says Goldstein. "Under the proposal to limit 401k contributions, low-income employees could see a 20% reduction in employer contributions, which would hurt their retirement nest egg."
With the possibility of a 64% decrease in 401k contributions, our firm is advising clients to consider alternatives for retirement income such as IRAs and annuities. "Many annuities today have lifetime income options which can be beneficial," says Goldstein.
About Brett Goldstein:
Brett Goldstein is Director of Retirement Planning at American Investment Planners, LLC based in Jericho, New York. He is an author, speaker and media personality who specializes in providing businesses and individuals with affordable retirement planning solutions. Goldstein's timely advice and tips have been featured on Fox Business Network, Kiplinger's, Wall Street Journal Radio, MarketWatch.com, New York Daily News, The Chicago Tribune, and many others.