Imagine working your entire life to save enough money to be able to retire only to find out a new tax plan by an incoming president would strip away about 17 percent of your income.
After economic experts reviewed Democratic presidential candidate Joe Biden’s 401(k) tax benefit plan, they found that is exactly what will happen to those in the upper-middle class.
Biden’s “plan would reduce the tax benefit of traditional retirement accounts for those earning above $80,250 but under $400,000, violating Biden’s tax pledge to not raise taxes on earners below the $400,000 threshold,” according to the Tax Foundation, a Washington-based non-profit group.
Breaking his word
Biden recently stated that anyone making less than $400,000 would not have to worry about paying additional taxes if he gets elected.
Most Americans spend their careers trying to get into that upper-middle-class echelon, which is roughly those making between $100,000 and $350,000 per year.
Even if we only get to that level for the last few years of our careers, it can make a big difference when it comes time to retire.
Biden’s new tax plan on 401(k) benefits, however, would hurt those Americans while giving a significant tax break to those in the lower tax brackets.
Biden wants to initiate a flat tax credit on these retirement accounts. The Biden campaign has not stated the exact percentage of his plan but the campaign has stated that Biden is hoping to get the plan to be “revenue-neutral” or as close to that point as it can get.
If that is the case, financial experts believe the tax credit percentage would have to be in the 26 percent range.
For those at the lower-earning scale, this would present a huge tax break, netting them about 8.5 percent more of a tax break.
However, those in the $80,000 to $400,000 range would have their benefit reduced by almost 17 percent, which is in direct contrast to what Joe Biden has promised Americans, according to the Tax Foundation.
That is a very significant reduction in benefits and could literally add years of work to those planning to retire based on the current 401(k) tax benefits structure.